10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2014

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 001-35507

INFOBLOX INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0062867
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3111 Coronado Drive Santa Clara, California 95054
(Address of principal executive offices)

(408) 986-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

Shares outstanding of the registrant’s common stock:

Class	Outstanding at May 31, 2014
Common Stock, $0.0001 par value per share	54,499,497

INFOBLOX INC.

INDEX

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II – OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	53

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

INFOBLOX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	April 30, 2014			July 31, 2013
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	91,668		$	69,828
Short-term investments	170,035			139,508
Accounts receivable, net	32,983			38,728
Inventory	5,772			4,478
Deferred tax assets	806			1,354
Prepaid expenses and other current assets	4,746			6,023
Total current assets	306,010			259,919
Property and equipment, net	18,540			18,370
Restricted cash	3,513			3,508
Intangible assets, net	4,713			5,494
Goodwill	33,293			32,726
Other assets	710			443
TOTAL ASSETS	$	366,779		$	320,460
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	13,959		$	12,387
Accrued compensation	13,099			12,472
Deferred revenue, net	79,177			68,479
Total current liabilities	106,235			93,338
Deferred revenue, net	31,207			29,693
Deferred tax liability	668			1,055
Other liabilities	6,238			6,821
TOTAL LIABILITIES	144,348			130,907
Commitments and contingencies (Note 5)
STOCKHOLDERS’ EQUITY:
Convertible preferred stock, $0.0001 par value per share—5,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.0001 par value per share—100,000 shares authorized; 54,327 shares and 51,670 shares issued and outstanding as of April 30, 2014 and July 31, 2013	5			5
Additional paid-in capital	349,293			302,101
Accumulated other comprehensive income (loss)	60			(11		)
Accumulated deficit	(126,927		)	(112,542		)
TOTAL STOCKHOLDERS’ EQUITY	222,431			189,553
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	366,779		$	320,460

See accompanying Notes to Condensed Consolidated Financial Statements.

3

INFOBLOX INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
Net revenue:
Products and licenses	$	30,799		$	33,596		$	98,326		$	91,501
Services	30,223			24,439			87,099			70,478
Total net revenue	61,022			58,035			185,425			161,979
Cost of revenue:
Products and licenses	7,119			7,786			22,092			20,726
Services	6,665			4,910			19,119			13,701
Total cost of revenue	13,784			12,696			41,211			34,427
Gross profit	47,238			45,339			144,214			127,552
Operating expenses:
Research and development	12,175			10,976			35,619			31,783
Sales and marketing	34,589			28,138			100,574			82,877
General and administrative	7,839			6,195			21,673			17,346
Total operating expenses	54,603			45,309			157,866			132,006
Income (loss) from operations	(7,365		)	30			(13,652		)	(4,454		)
Other income (expense), net	124			(45		)	(80		)	(371		)
Loss before provision for income taxes	(7,241		)	(15		)	(13,732		)	(4,825		)
Provision for income taxes	201			242			653			1,068
Net loss	$	(7,442	)	$	(257	)	$	(14,385	)	$	(5,893	)
Net loss per share - basic and diluted	$	(0.14	)	$	(0.01	)	$	(0.27	)	$	(0.12	)
Weighted-average shares used in computing net loss per share - basic and diluted	54,055			49,261			53,485			47,696

See accompanying Notes to Condensed Consolidated Financial Statements.

4

INFOBLOX INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
Net loss	$	(7,442	)	$	(257	)	$	(14,385	)	$	(5,893	)
Other comprehensive income
Unrealized holding gain on short-term investments, net	26			30			71			26
Comprehensive loss	$	(7,416	)	$	(227	)	$	(14,314	)	$	(5,867	)

See accompanying Notes to Condensed Consolidated Financial Statements.

5

INFOBLOX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended April 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,385	)	$	(5,893	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	30,139			16,190
Depreciation and amortization	6,556			4,637
Excess tax benefits from employee stock plans	(133		)	(641		)
Amortization of investment premium	419			265
Other	36			103
Changes in operating assets and liabilities:
Accounts receivable, net	5,745			(6,565		)
Inventory	(1,294		)	(1,635		)
Prepaid expenses, other current assets and other assets	1,215			(1,002		)
Accounts payable and accrued liabilities	1,471			1,521
Accrued compensation	627			2,306
Deferred revenue, net	12,198			15,403
Other liabilities	(583		)	6,145
Net cash provided by operating activities	42,011			30,834
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments	(92,947		)	(113,325		)
Proceeds from maturities of short-term investments	62,070			17,648
Purchases of property and equipment	(4,699		)	(13,944		)
Business acquisition	(1,000		)	—
Change in restricted cash	—			529
Net cash used in investing activities	(36,576		)	(109,092		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under the employee stock plans	16,272			17,500
Excess tax benefits from employee stock plans	133			641
Payment of remaining unpaid initial public offering costs	—			(235		)
Net cash provided by financing activities	16,405			17,906
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	21,840			(60,352		)
CASH AND CASH EQUIVALENTS—Beginning of period	69,828			156,613
CASH AND CASH EQUIVALENTS—End of period	$	91,668		$	96,261
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Restricted stock units issued in connection with business acquisition	$	573		$	—
Cash paid for income taxes, net	$	353		$	809
Purchases of property and equipment not yet paid	$	320		$	1,794
Change in liability due to vesting of early exercised stock options	$	48		$	204

See accompanying Notes to Condensed Consolidated Financial Statements.

6

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Infoblox Inc. (together with our subsidiaries, “we,” “us” or “our”) was originally incorporated in the State of Illinois in February 1999 and was reincorporated in the State of Delaware in May 2003. We are headquartered in Santa Clara, California and have subsidiaries and representative offices located throughout the world. We provide a broad family of enterprise and service provider-class solutions to automate management of the critical network infrastructure services needed for secure, scalable and fault-tolerant connections between applications, devices and users.

Basis of Presentation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated. The accompanying condensed consolidated balance sheet as of April 30, 2014, the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive loss for the three and nine months ended April 30, 2014 and 2013 and the condensed consolidated statements of cash flows for the nine months ended April 30, 2014 and 2013 are unaudited. The condensed consolidated balance sheet as of July 31, 2013 was derived from the audited consolidated balance sheet as of July 31, 2013. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, pursuant to the rules and regulations of the Securities Exchange Commission, or SEC. They do not include all of the financial information and footnotes required by GAAP for complete financial statements. We believe the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of our balance sheet as of April 30, 2014, our results of operations and comprehensive loss for the three and nine months ended April 30, 2014 and 2013 and cash flows for the nine months ended April 30, 2014 and 2013. All adjustments are of a normal recurring nature. The results for the three and nine months ended April 30, 2014 are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending July 31, 2014.

Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013. There have been no significant changes in our accounting policies during the three and nine months ended April 30, 2014, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended July 31, 2013.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Those management estimates and assumptions affect revenue recognition, allowances for doubtful accounts and sales returns, valuation of our cash equivalents and available-for-sale investments, valuation of inventory, determination of fair value of stock-based awards, valuation of goodwill and intangible assets acquired, impairment of goodwill and other intangible assets, amortization of intangible assets, contingencies and litigation and accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the condensed consolidated financial statements.

7

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Concentrations of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, short-term investments, restricted cash and accounts receivable. Our cash, cash equivalents, short-term investments and restricted cash are invested in high-credit quality financial instruments with banks and financial institutions. Such deposits may be in excess of insured limits provided on such deposits.

We mitigate credit risk in respect to accounts receivable by performing ongoing credit evaluations of our customers and maintaining a reserve for potential credit losses. In addition, we generally require our customers to prepay for maintenance and support services to mitigate the risk of uncollectible accounts receivable.

Significant customers are those which represent more than 10% of our total net revenue or gross accounts receivable balance at each respective balance sheet date. For the three and nine months ended April 30, 2014, Exclusive Networks Ltd., a distributor, accounted for 13.1% and 10.7% of our total net revenue. For the three and nine months ended April 30, 2013, Exclusive Networks Ltd. accounted for 11.5% and 11.9% of our total net revenue. Exclusive Networks Ltd. accounted for 13.6% and 11.2% of our total gross accounts receivable as of April 30, 2014 and July 31, 2013. We believe it is unlikely that the loss of any of our channel partners would have a long term material adverse effect on our total net revenue as we believe end-users would likely purchase our products from a different channel partner. However, a loss of any one of these channel partners could have a material adverse impact during the transition period.

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. We adopted ASU 2013-11 during the three months ended October 31, 2013 and the adoption did not have any impact on our financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2018 using one of two retrospective application methods. The Company has not determined the potential effects on the consolidated financial statements.

8

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2. NET INCOME (LOSS) PER SHARE

We compute basic net income (loss) per share using the weighted average number of common shares outstanding during the period. We compute diluted net income (loss) per share using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include shares issuable upon the exercise of stock options and upon the vesting of restricted stock units, or RSUs, and each purchase under our employee stock purchase plan, or ESPP, under the treasury stock method.

In loss periods, basic net loss per share and diluted net loss per share are the same since the effect of potential common shares is anti-dilutive and therefore excluded.

The following outstanding weighted-average shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended April 30,		Nine months ended April 30,
	2014	2013	2014	2013
	(In thousands)
Stock options to purchase common stock	3,448	5,584	3,693	6,198
Restricted stock units	1,789	441	1,707	182
Employee Stock Purchase Plan	15	95	115	40

NOTE 3. CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, RESTRICTED CASH AND FAIR VALUE MEASUREMENTS

Cash Equivalents, Short-term Investments and Restricted Cash

The following table summarizes our cash equivalents, short-term investments and restricted cash as of April 30, 2014:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(In thousands)
Cash equivalents:
Money market funds	$	5,898	$	—	$	—		$	5,898
Short-term investments:
U.S. Treasury securities	122,499		74		(18		)	122,555
U.S. government agency securities	34,599		13		(12		)	34,600
FDIC-backed certificates of deposit	12,880		6		(6		)	12,880
Total short-term investments	169,978		93		(36		)	170,035
Restricted cash:
U.S. Treasury securities	3,409		3		—			3,412
Total cash equivalents, short-term investments and restricted cash	$	179,285	$	96	$	(36	)	$	179,345

9

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the contractual maturities of our short-term investments which are classified as available-for-sale securities as of April 30, 2014:

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due within one year	$	91,285	$	91,329
Due after one year through two years	78,693		78,706
Total	$	169,978	$	170,035

We classify our available-for-sale investments as short-term investments in our condensed consolidated balance sheet based on management's intention to have the funds available for use in operations or strategic investments rather than actual maturity dates.     

The following table summarizes our cash equivalents, short-term investments and restricted cash as of July 31, 2013:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(In thousands)
Cash equivalents:
Money market funds	$	11,133	$	—	$	—		$	11,133
Short-term investments:
U.S. Treasury securities	99,754		12		(28		)	99,738
U.S. government agency securities	29,525		13		(4		)	29,534
FDIC-backed certificates of deposit	10,240		6		(10		)	10,236
Total short-term investments	139,519		31		(42		)	139,508
Restricted cash:
U.S. Treasury securities	3,407		—		—			3,407
Total cash equivalents, short-term investments and restricted cash	$	154,059	$	31	$	(42	)	$	154,048

10

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value Measurements

The following table sets forth the fair value of our financial assets by level within the fair value hierarchy:

	Fair Value Measurements at April 30, 2014 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level I)		(Level II)		(Level III)		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds	$	5,898	$	—	$	—	$	5,898
Short-term investments:
U.S. Treasury securities	122,555		—		—		122,555
U.S. government agency securities	—		34,600		—		34,600
FDIC-backed certificates of deposit	—		12,880		—		12,880
Total short-term investments	122,555		47,480		—		170,035
Restricted cash:
U.S. Treasury securities	3,412		—		—		3,412
Total financial assets	$	131,865	$	47,480	$	—	$	179,345

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INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Fair Value Measurements at July 31, 2013 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level I)		(Level II)		(Level III)		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds	$	11,133	$	—	$	—	$	11,133
Short-term investments:
U.S. Treasury securities	99,738		—		—		99,738
U.S. government agency securities	—		29,534		—		29,534
FDIC-backed certificates of deposit	—		10,236		—		10,236
Total short-term investments	99,738		39,770		—		139,508
Restricted cash:
U.S. Treasury securities	3,407		—		—		3,407
Total financial assets	$	114,278	$	39,770	$	—	$	154,048

We value our Level I assets, consisting of money market funds and U.S. Treasury securities using quoted prices in active markets for identical instruments. Financial assets whose fair values we measure on a recurring basis using Level II inputs consist of U.S. government agency securities and Federal Deposit Insurance Corporation, or FDIC-backed certificates of deposit. We measure the fair values of these assets with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments because the inputs used in the valuation model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the financial assets.

There were no transfers between Level I, Level II and Level III fair value hierarchies during the nine months ended April 30, 2014.

12

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4. INVENTORY AND DEFERRED REVENUE

Inventory

Inventory consists of the following:

	April 30, 2014		July 31, 2013
	(In thousands)
Raw materials	$	566	$	412
Finished goods	5,206		4,066
Total inventory	$	5,772	$	4,478

Deferred Revenue, Net

Deferred revenue, net consists of the following:

	April 30, 2014		July 31, 2013
	(In thousands)
Deferred revenue:
Products and licenses	$	4,839	$	7,791
Services	106,670		91,453
Total deferred revenue	111,509		99,244
Deferred cost of revenue:
Products and licenses	370		871
Services	755		201
Total deferred cost of revenue	1,125		1,072
Total deferred revenue, net	110,384		98,172
Less current portion	79,177		68,479
Non-current portion	$	31,207	$	29,693

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INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

We outsource the production of our hardware products to third-party contract manufacturers and enter into various inventory-related purchase commitments with these contract manufacturers and other suppliers.  Our arrangements with contract manufacturers allow them to procure component inventory on our behalf based on a rolling production forecast we provide to them.  In addition to any finished goods manufactured for us, we are obligated to purchase component inventory that the contract manufacturers procure in accordance with our forecast, unless a notice of order cancellation is given in advance of applicable lead times. As of April 30, 2014, we had $8.1 million in purchase commitments under these arrangements. 

Guarantees

We have entered into agreements with some of our customers that contain indemnification provisions relating to potential situations where claims could be alleged that our products infringe the intellectual property rights of a third party. We have, at our option and expense, the ability to repair any infringement, replace the product with a non-infringing functionally equivalent product, or refund our customers the unamortized value of the product based on its estimated useful life, typically five years. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities and corporate credit cards. We have not recorded a liability related to these indemnification and guarantee provisions, and our guarantees and indemnification arrangements have not had any significant impact on our condensed consolidated financial statements to date.

Loss Contingencies and Legal Proceedings

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the range of loss can be reasonably estimated. However, the actual loss in any such contingency may be materially different from our estimates, which could result in the need to record additional expenses. If the amount of liability is not probable or the amount cannot be reasonably estimated, no accruals have been made. We regularly evaluate current information available to management to determine whether such accruals should be adjusted and whether new accruals are required in the periods presented.

From time to time, we are subject to various legal proceedings, claims and litigation arising in the ordinary course of business. We do not believe we are party to any currently pending legal proceedings the outcome of which would have a material adverse effect on our financial position, results of operations or cash flows. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our financial position, results of operations or cash flows.

On April 16, 2013, Versata Software, Inc., or Versata, filed suit against us in the United States District Court for the District of Delaware in an action captioned Versata Software, Inc. F/K/A Trilogy Software, Inc.; and Versata Development Group, Inc. F/K/A Trilogy Development Group, Inc. v. Infoblox, Inc., Case No 1:13-cv-00678-UNA (D.Del.) (the “Action”).  In the Action, Versata alleges that we directly and/or indirectly infringed U.S. Patent Nos. 6,834,282; 6,907,414; 7,363,593 and 7,426,481 by making, using, licensing, selling and offering for sale software products and related services including but not limited to Infoblox IP Address Management. We continue to believe we have meritorious defenses to the claims asserted in these actions and intend to defend vigorously against them. We believe at this time that liabilities associated with these cases, while possible, are not probable, and therefore we have not recorded any accrual for them as of April 30, 2014. Further, any possible range of loss cannot be reasonably estimated at this time.

14

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6. ACQUISITIONS

On December 20, 2013, we closed the acquisition of substantially all of the assets of Internet Associates LLC, or IA, a small privately held software company that specialized in the automation of IP address management and IPv6. We did not acquire any tangible assets nor did we assume any material liabilities as part of this acquisition. We expect this acquisition will help us build on our core business.

We accounted for the IA acquisition using the acquisition method of accounting for business combinations. In addition to cash consideration of $1.0 million, we made employment offers to IA’s four former key employees in which they were granted an aggregate of 70,000 of our RSUs. Twenty-five percent of these RSUs, or 17,499, became fully vested upon closing of the transaction, and the remaining 52,501 RSUs will vest thereafter in four equal installments every six months over two years subject to their continued service to us. Aside from the RSU vesting conditions, there were no other incentives or contingent arrangements in connection with this acquisition. We accounted for the 17,499 RSUs as part of the purchase consideration as the vesting of such RSUs did not require any post-combination services. We have accounted for the other 52,501 RSUs as stock-based compensation since the vesting of such RSUs requires post-combination services. Based on the foregoing, the total purchase price of this acquisition consists of the following:

	Amount in Thousands
Cash consideration	$	1,000
Fair value of fully vested RSUs (1)	573
Total consideration	$	1,573

(1) This represents the fair value of the 17,499 RSUs that were granted to IA’s former key employees which became fully vested upon closing. We determined the fair value for purchase price consideration purposes based on our closing stock price of $32.73 on December 20, 2014, the effective closing of the transaction.

Of the total purchase price of $1.6 million, $1.0 million was allocated to the core/developed technology and $0.6 million was allocated to goodwill. The goodwill recognized in this transaction is deductible for tax purposes and is derived from expected benefits from cost synergies and former IA personnel who joined us after the acquisition.

We are amortizing the developed technology on a straight-line basis over an estimated useful life of 7 years. Amortization expense for this intangible asset was insignificant for the three and nine months ended April 30, 2014.

The acquisition-related transaction costs which were included in general and administrative expenses during the nine months ended April 30, 2014 in the condensed consolidated statement of operations were insignificant.

The historical financial results of IA were insignificant in relation to our condensed consolidated results of operations. As such, we have not provided additional historical pro forma acquisition information.

15

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7. STOCKHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS

Stock-based Compensation

The following table summarizes stock-based compensation expense for stock option grants, ESPP purchase rights and restricted stock units recorded in our condensed consolidated statements of operations:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Cost of revenue	$	953	$	387	$	2,617	$	1,191
Research and development	1,828		1,145		5,411		3,541
Sales and marketing	5,874		2,956		16,942		8,643
General and administrative	2,019		1,162		5,169		2,815
	$	10,674	$	5,650	$	30,139	$	16,190

The following table summarizes stock-based compensation expense by award type:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
RSUs	$	6,740	$	1,815	$	17,617	$	3,690
Stock options	2,996		2,586		9,441		7,445
ESPP	938		1,249		3,081		5,055
	$	10,674	$	5,650	$	30,139	$	16,190

The following table summarizes the unrecognized stock-based compensation balance, net of estimated forfeitures, by type of awards as of April 30, 2014:

	As of April 30, 2014		Weighted-Average Amortization Period
	(In thousands)		(In years)
RSUs	$	63,914	2.94
Stock options	17,163		2.07
ESPP	1,516		0.82
Total unrecognized stock-based compensation balance	$	82,593	2.72

16

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Determination of Fair Value

The fair value of stock option grants and ESPP purchase rights was estimated at the date of grant and start of the offering period using the following assumptions:

	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
Stock Options:
Expected term (in years)	6.08			6.08			6.08			6.08
Risk-free interest rate	1.89		%	1.06		%	1.85		%	0.97		%
Expected volatility	56		%	53		%	54		%	53		%
Dividend rate	—		%	—		%	—		%	—		%
Weighted average fair value per share	$	11.69		$	10.69		$	18.64		$	9.78
Employee Stock Purchase Plan:
Expected term (in years)	—			—			0.50-2.00			0.50 - 2.00
Risk-free interest rate	—			—			0.09% - 0.38%			0.12% - 0.26%
Expected volatility	—			—			55% - 67%			53% - 58%
Dividend rate	—			—			—		%	—		%
Weighted average fair value per share	$	—		$	—		$	12.87		$	7.07

Under our ESPP, employees purchased approximately 0.2 million shares at an average price per share of $15.26 and 0.3 million shares at an average price per share of $13.60 during the nine months ended April 30, 2014 and 2013.

Stock Option Activity

A summary of the stock option activity under our stock plans during the nine months ended April 30, 2014 is presented below:

	Number of Shares Underlying Outstanding Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In thousands)
Outstanding as of July 31, 2013	6,663		$	9.35	7.47	$	155,580
Granted	434		$	35.60
Exercised	(1,862	)	$	6.76
Canceled due to forfeitures	(159	)	$	15.86
Outstanding as of April 30, 2014	5,076		$	12.34	7.12	$	45,072
Vested and expected to vest as of April 30, 2014	4,897		$	12.04	7.07	$	44,330
Vested and exercisable as of April 30, 2014	2,780		$	8.07	6.30	$	32,304

17

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock Unit Activity

A summary of the restricted stock unit activity during the nine months ended April 30, 2014 is presented below:

	Number of Units		Weighted-Average Grant Date Fair Value Per Share
	(In thousands)
Outstanding as of July 31, 2013	1,986		$	21.15
Granted	1,767		$	35.84
Vested	(550	)	$	21.02
Cancellations due to forfeitures	(166	)	$	28.57
Outstanding as of April 30, 2014	3,037		$	29.29

NOTE 8. INCOME TAXES

The provision for income taxes for each of the three months ended April 30, 2014 and 2013 was $0.2 million, and consisted primarily of state and foreign income taxes.

    The provision for income taxes for the nine months ended April 30, 2014 and 2013 was $0.7 million and $1.1 million, which consisted of state and foreign income taxes. The decrease in the provision for income taxes for the nine months ended April 30, 2014 compared to the same period in the prior year was principally attributable to lower state income tax as a result of lower fiscal 2014 projected taxable income.

For the three and nine months ended April 30, 2014 and 2013, our provisions for income taxes differed from the statutory amount primarily due to U.S. and foreign taxes currently payable, as we realized no benefit for current year losses due to maintaining a full valuation allowance against the U.S. net deferred tax assets.

The realization of tax benefits of deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence, management does not believe it is more likely than not that the domestic net deferred tax assets will be realizable. Accordingly, we have provided a full valuation allowance against our domestic net deferred tax assets as of April 30, 2014 and July 31, 2013. We intend to maintain the valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance. During the three and nine months ended April 30, 2014, there have been no material changes to the total amount of unrecognized tax benefits.

18

INFOBLOX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

NOTE 9. SEGMENT INFORMATION

We operate in one single segment. The following table represents net revenue based on the customer’s location, as determined by the customer’s shipping address:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Americas	$	38,064	$	38,456	$	121,710	$	105,499
Europe, Middle East and Africa ("EMEA")	15,118		13,129		42,918		39,663
Asia Pacific ("APAC")	7,840		6,450		20,797		16,817
Total net revenue	$	61,022	$	58,035	$	185,425	$	161,979

Included within the Americas total in the above table is revenue from sales in the United States of $35.9 million and $36.2 million for the three months ended April 30, 2014 and 2013 and $114.4 million and $99.5 million for the nine months ended April 30, 2014 and 2013. Aside from the United States, no other country comprised more than 10% of our net revenue for the three and nine months ended April 30, 2014 and 2013.

Our property and equipment, net by location is summarized as follows:

	April 30, 2014		July 31, 2013
	(In thousands)
Americas	$	18,030	$	17,997
APAC	244		224
EMEA	266		149
Total property and equipment, net	$	18,540	$	18,370

Included within the Americas total in the above table is property and equipment, net in the United States of $18.0 million and $18.0 million as of April 30, 2014 and July 31, 2013. 

NOTE 10. SUBSEQUENT EVENT

On May 30, 2014, an alleged class action entitled Paul Ansfield v. Infoblox Inc., et al., No. 5:14-cv-2500-VC, was filed in the United States District Court for the Northern District of California, against us and two of our officers. The suit asserts purported claims under Sections 10(b) and 20(a) of the Exchange Act for allegedly misleading statements regarding our business and financial results. The suit is purportedly brought on behalf of purchasers of our securities between September 6, 2013 and February 10, 2014, and seeks compensatory damages, fees and costs. A similar complaint, purportedly brought on behalf of purchasers of our securities between September 5, 2013 and May 29, 2014, was filed in the same court on June 4, 2014, in an action entitled Safedin Beqaj v. Infoblox Inc., et al., No. 4:14-cv-2564-PJH. The defendants have not yet responded to these complaints. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” “assumes,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under “Part II, Item 1A. Risk Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes to audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on September 20, 2013. In this Quarterly Report, unless otherwise specified or the context otherwise requires, “Infoblox,” “we,” “us,” and “our” refer to Infoblox and its consolidated subsidiaries.

Overview

We are a leader in automated network control and provide an appliance-based solution that enables dynamic networks and next-generation data centers. Our solution combines real-time IP address management with the automation of key network control and network change and configuration management processes in purpose-built physical and virtual appliances. It is based on our proprietary software that is highly scalable and automates vital network functions, such as IP address management, device configuration, compliance, network discovery, policy implementation, security and monitoring. Our solution enables our end customers to create dynamic networks, address burgeoning growth in the number of network-connected devices and applications, manage complex networks efficiently and capture more fully the value from virtualization and cloud computing. Our physical appliances are built by third-party manufacturers and primarily utilize readily available components. Our virtual appliances are designed to approximate their physical counterparts in functionality, scalability and performance and currently operate in VMware and Microsoft virtual environments and are integrated within certain third party products.

We derive revenue from sales and licensing of our products and sales of our services. We generate products and licenses revenue primarily from sales of perpetual licenses to our software installed on our physical and virtual appliances. We generate services revenue primarily from sales of maintenance and support and, to a lesser extent, from sales of training and consulting services. End customers typically purchase maintenance and support in conjunction with purchases of our products, and generally renew their maintenance and support contracts upon expiration. Maintenance and support provide a significant source of recurring revenue for us. Services revenue was 49.5% and 42.1% of our total net revenue for the three months ended April 30, 2014 and 2013 and was 47.0% and 43.5% of our total net revenue for the nine months ended April 30, 2014 and 2013.

We sell our products and services to enterprises and government entities primarily through our channel partners, including distributors, systems integrators, managed service providers and value-added resellers in the United States and internationally. We also have a field sales force that sells our solution directly to certain end customers, and typically works closely with our channel partners in all phases of initial sales of our products and services.

20

Our results of operations have benefited from the increasing complexity of networks, including increasing numbers of connected devices and applications, expanding use of technologies, such as virtualization, cloud computing and adoption of IPv6, which we believe is straining legacy network control approaches and driving organizations to replace their legacy approaches to network control with automated network control solutions. Accordingly, we expect that our future business and operating results will be significantly affected by the speed with which organizations transition to automated network control solutions.  Our future business and operating results will depend both on our ability to add new end customers continually and to continue to sell additional products and services to our growing base of existing customers directly and through our channel partners.  Since our prior results have benefited from our success at selling more complex and higher performance configurations of our product solutions, which generally result in higher value per product sold, we expect that our ability to sell more robust product configurations will be an important factor in sustaining our revenue growth rates and our operating results in any quarter. To achieve the foregoing objectives, we intend to continue to invest for long-term growth by, among other things, expanding our field sales force, our channel and technology partnerships and our programs to market our solutions. In addition, we expect to continue to invest in research and development and selective acquisitions in order to expand the capabilities of our solutions. We expect that our operating results will be impacted by the timing and size of these investments over the next few quarters. 

Financial Highlights

In the third quarter of fiscal 2014, we saw continued year-over-year growth in total net revenue with significant increases in EMEA and APAC, partially offset by a slight decrease in the Americas. Total net revenue increased 5.1% year-over-year with services increasing by 23.7% while product revenue decreased by 8.3%. From a geographic perspective, year-over-year revenue increased by 15.1% in EMEA and 21.6% in APAC while the Americas decreased by 1.0%. Sequentially, product revenue decreased 2.4% from the prior quarter while services revenue increased by 3.1% and revenue in EMEA and APAC increased 9.4% and 16.7% while the Americas revenue decreased 5.7%. As reflected in our results of operations, the challenges we began to experience in our business during January 2014 continued in the third quarter of fiscal 2014. While we are taking actions to improve our sales execution and growth prospects, we anticipate that we willcontinue to experience a slowing of our revenue growth for at least two quarters.

During the quarter, we generated $9.5 million in cash flows from operating activities and exited the third quarter with approximately $261.7 million in cash, cash equivalents and short term investments and $110.4 million of total deferred net revenue.

We continued to invest in our organization to achieve our profitability goals, incurring additional expenses to expand our sales, support, marketing, development, and general and administrative capabilities to grow our business. Personnel-related costs, including stock-based compensation, are the most significant component of our operating expenses. During the nine months ended April 30, 2014, total operating expenses increased by 20.5% compared to the same period in the prior year. As of April 30, 2014, our employee count was 684 representing an increase of 21.3% from April 31, 2013 and was the most significant driver of the increase in costs and operating expenses.

Stock-based compensation expense amounted to $10.7 million and $5.7 million in the three months ended April 30, 2014 and 2013 and was $30.1 million and $16.2 million during the nine months ended April 30, 2014 and 2013. We expect to continue to incur significant stock-based compensation expense and anticipate further growth in stock-based compensation expense as our employee base grows because we expect stock-based compensation to continue to play an important part in the overall compensation structure for our employees.

21

Results of Operations

The following tables provide condensed consolidated statements of operations data in dollars and as a percentage of net revenue for the three and nine months ended April 30, 2014 and 2013.

	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
	(In thousands)
Net revenue:
Products and licenses	$	30,799		$	33,596		$	98,326		$	91,501
Services	30,223			24,439			87,099			70,478
Total net revenue	61,022			58,035			185,425			161,979
Cost of revenue(1):
Products and licenses(2)	7,119			7,786			22,092			20,726
Services	6,665			4,910			19,119			13,701
Total cost of revenue	13,784			12,696			41,211			34,427
Gross profit	47,238			45,339			144,214			127,552
Operating expenses:
Research and development(1)	12,175			10,976			35,619			31,783
Sales and marketing(1)(2)	34,589			28,138			100,574			82,877
General and administrative(1)	7,839			6,195			21,673			17,346
Total operating expenses	54,603			45,309			157,866			132,006
Income (loss) from operations	(7,365		)	30			(13,652		)	(4,454		)
Other income (expense), net	124			(45		)	(80		)	(371		)
Loss before provision for income taxes	(7,241		)	(15		)	(13,732		)	(4,825		)
Provision for income taxes	201			242			653			1,068
Net loss	$	(7,442	)	$	(257	)	$	(14,385	)	$	(5,893	)
	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
Net revenue:
Products and licenses	50.5		%	57.9		%	53.0		%	56.5		%
Services	49.5			42.1			47.0			43.5
Total net revenue	100.0			100.0			100.0			100.0
Cost of revenue(1):
Products and licenses(2)	11.7			13.4			11.9			12.8
Services	10.9			8.5			10.3			8.5
Total cost of revenue	22.6			21.9			22.2			21.3
Gross margin	77.4			78.1			77.8			78.7
Operating expenses:
Research and development(1)	20.0			18.9			19.2			19.6
Sales and marketing(1)(2)	56.7			48.5			54.2			51.1
General and administrative(1)	12.8			10.6			11.8			10.7
Total operating expenses	89.5			78.0			85.2			81.4
Operating margin	(12.1		)	0.1			(7.4		)	(2.7		)
Other income (expense), net	0.2			(0.1		)	—			(0.3		)
Loss before provision for income taxes	(11.9		)	—			(7.4		)	(3.0		)
Provision for income taxes	0.3			0.4			0.4			0.6
Net loss	(12.2		)%	(0.4		)%	(7.8		)%	(3.6		)%

22

(1) Results above include stock-based compensation as follows:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Stock-based compensation:
Cost of revenue	$	953	$	387	$	2,617	$	1,191
Research and development	1,828		1,145		5,411		3,541
Sales and marketing	5,874		2,956		16,942		8,643
General and administrative	2,019		1,162		5,169		2,815
Total stock-based compensation	$	10,674	$	5,650	$	30,139	$	16,190

(2) Results above include intangible asset amortization expense as follows:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Intangible asset amortization:
Cost of products and licenses revenue	$	290	$	254	$	820	$	762
Sales and marketing	327		327		981		981
Total intangible asset amortization expense	$	617	$	581	$	1,801	$	1,743

Results of Operations for the Three and Nine Months Ended April 30, 2014 and 2013

The following table presents our net revenue for the three and nine months ended April 30, 2014 and related changes from the same period in prior year:

Net Revenue

	Three Months Ended April 30,				Change in					Nine Months Ended April 30,				Change in
	2014		2013		$			%		2014		2013		$		%
	(Dollars in thousands)
Products and licenses	$	30,799	$	33,596	$	(2,797	)	(8.3	)%	$	98,326	$	91,501	$	6,825	7.5	%
Services	30,223		24,439		5,784			23.7	%	87,099		70,478		16,621		23.6	%
Total net revenue	$	61,022	$	58,035	$	2,987		5.1	%	$	185,425	$	161,979	$	23,446	14.5	%

Three Months Ended April 30, 2014 Compared to Three Months Ended April 30, 2013

Our net revenue increased by $3.0 million, or 5.1%, to $61.0 million during the three months ended April 30, 2014 from $58.0 million during the three months ended April 30, 2013.

Products and licenses revenue decreased by $2.8 million, or 8.3%, to $30.8 million during the three months ended April 30, 2014 from $33.6 million during the three months ended April 30, 2013. The change was due primarily to decreased sales of our solutions.

23

Services revenue increased $5.8 million, or 23.7%, to $30.2 million during the three months ended April 30, 2014 from $24.4 million during the three months ended April 30, 2013. The change was primarily attributable to the growth of our established base of customers with maintenance and support contracts for which revenue is recognized ratably over the service period. As our end customer base grows, we expect our revenue generated from maintenance and support services to increase.

Nine Months Ended April 30, 2014 Compared to Nine Months Ended April 30, 2013

Our net revenue increased by $23.4 million, or 14.5%, to $185.4 million during the nine months ended April 30, 2014 from $162.0 million during the nine months ended April 30, 2013.

Products and licenses revenue increased by $6.8 million, or 7.5%, to $98.3 million during the nine months ended April 30, 2014 from $91.5 million during the nine months ended April 30, 2013. The change was due primarily to increased sales of our higher capacity and higher performance products.

    Services revenue increased $16.6 million, or 23.6%, to $87.1 million during the nine months ended April 30, 2014 from $70.5 million during the nine months ended April 30, 2013. The change was primarily attributable to the growth of our established base of customers with maintenance and support contracts for which revenue is recognized ratably over the service period.

Gross Profit

	Three Months Ended April 30,						Change in					Nine Months Ended April 30,						Change in
	2014			2013			$			%		2014			2013			$		%
	(Dollars in thousands)
Products and Licenses Gross Profit:
Products and licenses gross profit	$	23,680		$	25,810		$	(2,130	)	(8.3	)%	$	76,234		$	70,775		$	5,459	7.7	%
Products and licenses gross margin	76.9		%	76.8		%				0.1		77.5		%	77.3		%			0.2
Services Gross Profit:
Services gross profit	$	23,558		$	19,529		$	4,029		20.6	%	$	67,980		$	56,777		$	11,203	19.7	%
Services gross margin	77.9		%	79.9		%				(2.0	)	78.0		%	80.6		%			(2.6	)
Total Gross Profit:
Total gross profit	$47,238			$45,339			$	1,899		4.2	%	$	144,214		$	127,552		$	16,662	13.1	%
Total gross margin	77.4		%	78.1		%				(0.7	)	77.8		%	78.7		%			(0.9	)

Three Months Ended April 30, 2014 Compared to Three Months Ended April 30, 2013

Total gross margin during the three months ended April 30, 2014 was 0.7 percentage point lower than the same period in the prior year primarily due to the decrease in our services gross margin. Services gross margin decreased by 2.0 percentage points primarily due to personnel costs which increased at a higher rate than our services revenue.

Nine Months Ended April 30, 2014 Compared to Nine Months Ended April 30, 2013

Total gross margin during the nine months ended April 30, 2014 was 0.9 percentage point lower than the same period in the prior year primarily due to the decrease in our services gross margin. Services gross margin decreased by 2.6 percentage points primarily due to personnel costs which increased at a higher rate than our services revenue.

24

Operating Expenses

	Three Months Ended April 30,				Change in				Nine Months Ended April 30,				Change in
	2014		2013		$		%		2014		2013		$		%
	(Dollars in thousands)
Research and development	$	12,175	$	10,976	$	1,199	10.9	%	$	35,619	$	31,783	$	3,836	12.1	%
Sales and marketing	34,589		28,138		6,451		22.9	%	100,574		82,877		17,697		21.4	%
General and administrative	7,839		6,195		1,644		26.5	%	21,673		17,346		4,327		24.9	%
Total operating expenses	$	54,603	$	45,309	$	9,294	20.5	%	$	157,866	$	132,006	$	25,860	19.6	%

Three Months Ended April 30, 2014 Compared to Three Months Ended April 30, 2013

Research and Development Expenses

Research and development expenses increased by $1.2 million, or 10.9%, to $12.2 million during the three months ended April 30, 2014 from $11.0 million during the three months ended April 30, 2013. The change was primarily attributable to a $0.5 million increase in the cost of third-party engineering and development services and a $0.4 million increase in personnel costs mainly due to the increase in stock-based compensation associated with our equity compensation programs. We intend to continue to invest in our research and development organization but expect research and development expense as a percentage of revenue to remain relatively consistent for the remainder of fiscal 2014.

Sales and Marketing Expenses

Sales and marketing expenses increased by $6.5 million, or 22.9%, to $34.6 million during the three months ended April 30, 2014 from $28.1 million during the three months ended April 30, 2013. The change was primarily related to a $5.7 million increase in personnel costs, which includes a $2.9 million increase in stock-based compensation related to our equity compensation programs. The change was also attributable to a $0.4 million increase in facility and information technology related expenses. We intend to continue to make investments in our sales resources and infrastructure and expect sales and marketing expense as a percentage of revenue to slightly increase for the remainder of fiscal 2014.

General and Administrative Expenses

General and administrative expenses increased by $1.6 million, or 26.5%, to $7.8 million during the three months ended April 30, 2014 from $6.2 million during the three months ended April 30, 2013. The change was principally attributable to a $1.3 million increase in personnel costs associated primarily with increased headcount. This increase included a $0.9 million increase in stock-based compensation related to our equity compensation programs. In addition, there was a $0.3 million increase in consulting, professional accounting, tax and advisory services associated with our organizational growth. We expect general and administrative expense as a percentage of revenue to remain relatively consistent during the remainder of fiscal 2014.

Nine Months Ended April 30, 2014 Compared to Nine Months Ended April 30, 2013

Research and Development Expenses

Research and development expenses increased by $3.8 million, or 12.1%, to $35.6 million during the nine months ended April 30, 2014 from $31.8 million during the nine months ended April 30, 2013. The change was primarily attributable to a $1.7 million increase in personnel costs mainly due to an increase in stock-based compensation associated with our equity compensation programs. The change was also due to a $0.9 million increase in the cost of third-party engineering and development services and a $0.8 million increase in facility and information technology related expenses.

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Sales and Marketing Expenses

Sales and marketing expenses increased by $17.7 million, or 21.4%, to $100.6 million during the nine months ended April 30, 2014 from $82.9 million during the nine months ended April 30, 2013. The change was primarily related to a $14.5 million increase in personnel costs including an $8.3 million increase in stock-based compensation related to our equity compensation programs. The change was also attributable to a $2.2 million increase in facility and information technology related expenses and a $0.3 million increase in marketing expenses related to increased participation in marketing events with channel and technology partners.

General and Administrative Expenses

General and administrative expenses increased by $4.3 million, or 24.9%, to $21.7 million during the nine months ended April 30, 2014 from $17.3 million during the nine months ended April 30, 2013. The change was principally attributable to a $4.1 million increase in personnel costs associated primarily with increased headcount. This increase included a $2.4 million increase in stock-based compensation related to our equity compensation programs.

Provision for Income Taxes

	Three Months Ended April 30,				Change in					Nine Months Ended April 30,				Change in
	2014		2013		$			%		2014		2013		$			%
	(Dollars in thousands)
Provision for income taxes	$	201	$	242	$	(41	)	(16.9	)%	$	653	$	1,068	$	(415	)	(38.9	)%

The provision for income taxes for the three months ended April 30, 2014 and 2013 was $0.2 million for both periods, and the provision for income taxes for the nine months ended April 30, 2014 and 2013 was $0.7 million and $1.1 million. The provision for income taxes consisted primarily of state and foreign income taxes. The decrease in the provision for income taxes for nine months ended April 30, 2014 compared to the same period in the prior year was principally attributable to lower state income tax as a result of lower projected fiscal 2014 taxable income. We continued to provide a full valuation allowance against our domestic net deferred tax assets. As a result of the utilization of our net operating losses, we expect to experience higher levels of provision for income taxes in future annual periods.

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Liquidity and Capital Resources

	April 30, 2014		July 31, 2013
	(In thousands)
Cash and cash equivalents	$	91,668	$	69,828
Short-term investments	170,035		139,508
Total cash, cash equivalents and short-term investments	$	261,703	$	209,336
Working Capital	$	199,775	$	166,581

	Nine Months Ended April 30,
	2014			2013
	(In thousands)
Net cash provided by operating activities	$	42,011		$	30,834
Net cash used in investing activities	$	(36,576	)	$	(109,092	)
Net cash provided by financing activities	$	16,405		$	17,906

Cash, Cash Equivalents and Short-term Investments

As of April 30, 2014, we had cash, cash equivalents and short-term investments of $261.7 million, including$7.3 million held by our foreign subsidiaries. We intend to permanently reinvest our earnings from foreign operations, and do not anticipate that we will need funds generated from foreign operations to fund our domestic operations. In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously provided, we would be required to accrue and pay additional U.S. taxes in order to repatriate these funds. Cash, cash equivalents and short-term investments exclude $3.5 million of U.S. Treasury securities and time deposits maintained in connection with various letters of credit, which are classified as restricted cash. Cash, cash equivalents and short-term investments consist of cash, money market funds, U.S. Treasury securities, U.S. government agency securities and FDIC-backed certificates of deposit. We believe that our existing cash, cash equivalents and short-term investments, together with cash generated from operations, will be sufficient to meet our working capital expenditure requirements for at least the next 12 months. In the event that we require additional financing from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition would be adversely affected.

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Cash Flows from Operating Activities

Our cash provided by operating activities is driven primarily by sales and licenses of our products and, to a lesser extent, by up-front payments from end customers under maintenance and support contracts. Our primary uses of cash from operating activities have been for personnel-related expenditures, manufacturing costs, marketing and promotional expenses and costs related to our facilities. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and the extent to which we increase spending on personnel and sales and marketing activities as our business grows.

Cash provided by operating activities of $42.0 million during the nine months ended April 30, 2014 was primarily attributable to a net loss of $14.4 million, which was more than offset by non-cash charges of $30.1 million for stock-based compensation, $6.6 million for depreciation and amortization and a $19.4 million cash inflow from the change in our net operating assets and liabilities. The $19.4 million change in our net operating assets and liabilities was primarily the result of a $12.2 million increase in deferred revenue attributable to an increase in our established base of maintenance and support contracts, a $5.7 million decrease in accounts receivable due primarily to lower shipments in the quarter ended April 30, 2014, a $1.5 million increase in accounts payable and accrued liabilities and a $1.2 million decrease in prepaid expenses, other current assets and other assets, partially offset by a $1.3 million increase in inventory primarily due to an increase in inventory at our international depots.

    Cash provided by operating activities of $30.8 million during the nine months ended April 30, 2013 was primarily attributable to a net loss of $5.9 million, which was more than offset by non-cash charges of $16.2 million for stock-based compensation, $4.6 million for depreciation and amortization and a $16.2 million cash inflow from the change in our net operating assets and liabilities. The $16.2 million change in our net operating assets and liabilities was primarily the result of a $15.4 million increase in deferred revenue attributable to an increase in our established base of maintenance and support contracts, a $6.1 million increase in other liabilities primarily driven by the collection of leasehold improvement incentives related to our new corporate headquarters, a $2.3 million increase in accrued compensation and a $1.5 million increase in accounts payable and accrued liabilities, partially offset by a $6.6 million increase in accounts receivable due to increased revenue and timing of invoicing, a $1.6 million increase in inventory for our future shipments and a $1.0 million increase in prepaid expenses, other current assets and other assets.

Cash Flows from Investing Activities

The $36.6 million cash used in our investing activities during the nine months ended April 30, 2014 was primarily due to $92.9 million in cash used to purchase short-term investments, $4.7 million in cash used mainly for purchases of computer equipment and software and certain leasehold improvements and $1.0 million cash used in the IA acquisition, partially offset by $62.1 million of proceeds from maturities of short-term investments.

The $109.1 million cash used in our investing activities during the nine months ended April 30, 2013 was primarily due to $113.3 million in cash used to purchase short-term investments and $13.9 million in cash used for purchases of leasehold improvements for our new corporate headquarters and computer equipment and software, partially offset by a $17.6 million proceeds from maturities of short-term investments and a $0.5 million decrease in restricted cash.

Cash Flows from Financing Activities

Cash provided by financing activities during the nine months ended April 30, 2014 and 2013 consisted primarily of net proceeds from the issuance of common stock under our employee stock plans which amounted to $16.3 million and $17.5 million.     

Critical Accounting Policies

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States and include our accounts and the accounts of our wholly-owned subsidiaries. The preparation of these condensed consolidated financial statements requires our management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the applicable periods. We base our estimates, assumptions and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported. We evaluate our estimates, assumptions and judgments on an ongoing basis.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended July 31, 2013.

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Contractual Obligations

As of April 30, 2014, we had $8.1 million in purchase commitments with our third-party contract manufacturers. There have been no other significant changes during the three and nine months ended April 30, 2014 to the contractual obligations disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013.

Off-Balance Sheet Arrangements

As of April 30, 2014, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Recent Accounting Pronouncements

See Note 1 of the notes to our condensed consolidated financial statements for a full description of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We do not hold or issue financial instruments for trading purposes.

Our exposures to market risk have not changed materially since July 31, 2013. For quantitative and qualitative disclosures about market risk, see Item 7A Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended July 31, 2013.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on our management’s evaluation (with the participation of our principal executive officer (chief executive officer, or CEO), and principal financial officer (chief financial officer, or CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended April 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting means a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Inherent Limitations of Internal Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Intellectual Property Litigation

On April 16, 2013, Versata Software, Inc., or Versata, filed suit against us in the United States District Court for the District of Delaware in an action captioned Versata Software, Inc. F/K/A Trilogy Software, Inc.; and Versata Development Group, Inc. F/K/A Trilogy Development Group, Inc. v. Infoblox, Inc., Case No 1:13-cv-00678-UNA (D.Del.) (the “Action”).  In the Action, Versata alleges that we directly and/or indirectly infringed U.S. Patent Nos. 6,834,282; 6,907,414; 7,363,593 and 7,426,481 by making, using, licensing, selling and offering for sale software products and related services including but not limited to Infoblox IP Address Management. We continue to believe we have meritorious defenses to the claims asserted in these actions and intend to defend vigorously against them. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows.

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Securities Litigation

On May 30, 2014, an alleged class action entitled Paul Ansfield v. Infoblox Inc., et al., No. 5:14-cv-2500-VC, was filed in the United States District Court for the Northern District of California, against us and two of our officers. The suit asserts purported claims under Sections 10(b) and 20(a) of the Exchange Act for allegedly misleading statements regarding our business and financial results. The suit is purportedly brought on behalf of purchasers of our securities between September 6, 2013 and February 10, 2014, and seeks compensatory damages, fees and costs. A similar complaint, purportedly brought on behalf of purchasers of our securities between September 5, 2013 and May 29, 2014, was filed in the same court on June 4, 2014, in an action entitled Safedin Beqaj v. Infoblox Inc., et al., No. 4:14-cv-2564-PJH. The defendants have not yet responded to these complaints. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows.

From time to time, we are subject to various legal proceedings, claims and litigation arising in the ordinary course of business. We do not believe we are party to any currently pending legal proceedings the outcome of which would have a material adverse effect on our financial position, results of operations or cash flows. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our financial position, results of operations or cash flows.    

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below and all other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, before making a decision to invest in our common stock. Our business, operating results, financial condition or prospects could be materially and adversely affected by any of these risks and uncertainties. In that case, the trading price of our common stock could decline and you might lose all or part of your investment. In addition, the risks and uncertainties discussed below are not the only ones we face. Our business, operating results, financial performance or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. In assessing the risks and uncertainties described below, you should also refer to the other information contained in this Quarterly Report on Form 10-Q before making a decision to invest in our common stock.

Risks Related to Our Business and Industry

We have a history of losses, and we may not become profitable or maintain profitability.

Since our inception in 1999, we have incurred a net loss in each fiscal year except 2010. During the three and nine months ended April 30, 2014, we incurred a net loss of $7.4 million and $14.4 million. As a result, we had an accumulated deficit of $126.9 million at April 30, 2014. We may not become profitable in the future or may be unable to maintain any profitability achieved if we fail to increase our net revenue and manage our expenses or if we incur unanticipated liabilities. Revenue growth may slow or revenue may decline for a number of reasons, including slowing demand for our products or services, increasing competition, the timing of revenue recognition, lengthening sales cycles, decelerating growth of, or declines in, our overall market, or our failure to capitalize on growth opportunities or to introduce new products and services. In addition, we expect that our operating expenses, including stock-based compensation, will continue to increase in all areas as we seek to grow our business and expand our supporting infrastructure and personnel globally. Any failure by us to achieve and maintain profitability could cause the price of our common stock to decline significantly.

Our recent growth rates may not be indicative of our future growth, and we may not continue to grow at our recent pace or at all.

Our continued business and revenue growth will depend, in part, on our ability to continue to sell our products to new end customers, sell additional products to our existing end customers, introduce new products or enhancements and increase our share of and compete successfully in new, growing markets, and we may fail to do so. For example, the challenges we began to experience during the last month of the second quarter of fiscal 2014 continued in the third quarter of fiscal 2014, and we anticipate that we will continue to experience a slowing of our revenue growth for at least two quarters. Accordingly, you should not consider our recent growth rate in net revenue as indicative of our future growth.

Our net revenue and operating results could vary significantly from period to period and be unpredictable, which could cause the market price of our common stock to decline.

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The sale and licensing of our products generates a majority of our net revenue. The timing of sales and licensing of products can be difficult to predict and can result in significant fluctuations in our net revenue from period to period. Our operating results have fluctuated significantly in the past, and may continue to fluctuate in the future, as a result of a variety of factors, many of which are outside of our control. As a result, comparing our net revenue and operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.     

We have based our current and projected future expense levels on our operating plans and sales forecasts, and our operating costs are relatively fixed in the short term. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in net revenue, and even a small shortfall in net revenue could disproportionately and adversely affect our financial results for a given quarter.

It is possible that our operating results in some periods may be below market expectations. This would likely cause the market price of our common stock to decline. In addition to the other risk factors listed in this section, our operating results may be affected by a number of factors, including: 

▪the timing of sales of our products and services;

▪ the inherent complexity, length and associated unpredictability of our sales cycles, including the varying budgetary cycles and purchasing priorities of our end customers;

▪ the timing of revenue recognition as a result of guidance under accounting principles generally accepted in the United States;

▪ the loss or delay of any anticipated large sales in a given quarterly period.

• fluctuations in demand for our products and services, including seasonal variations;

▪ the timing of the resale of our products sold to distributors, for which we generally recognize revenue upon reported sell-through;

▪ the mix of our products, services and product solution configurations sold during the period;

▪ the mix of distribution channels through which our products and services are sold;

▪ the rate and discounts at which customers replace obsolete products;

▪ the timing and success of changes in our product offerings or those of our competitors;

▪ changes in our or our competitors' pricing policies or sales terms;

▪ the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

▪ our ability to control costs, including the costs of our third-party manufacturers;

▪ the ability to obtain sufficient supplies of components at acceptable prices, or at all;

▪ the timing of costs related to the development or acquisition of technologies or businesses;

▪ our inability to complete or integrate efficiently any acquisitions that we may undertake;

▪ changes in the regulatory environment for our products domestically and internationally;

▪ claims of intellectual property infringement against us and any resulting temporary or permanent injunction prohibiting us from selling our products or requirement to pay damages or expenses associated with any of those claims; and

▪ general economic conditions in our domestic and international markets.

Further, end customer buying patterns and sales cycles can vary significantly from quarter to quarter and are not subject to an established pattern over the course of a quarter. Accordingly, at the beginning of a quarter, we have limited visibility into the level of sales that will be made in that quarter. If expected net revenue at the end of any quarter is reduced or delayed for any reason, including, among other things, the failure of anticipated purchase orders to materialize, our inability to deliver products prior to quarter-end to fulfill purchase orders received near the end of the quarter, our failure to manage inventory properly in a way to meet demand, or our inability to release new products on schedule, our net revenue and operating results for that quarter could be materially and adversely affected.

As a result of the foregoing factors, our operating results in one or more future periods may fail to meet or exceed our projections or the expectations of securities analysts or investors. In that event, the trading price of our common stock would likely decline.

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Since large sales may have a significant impact on our results from time to time, our quarterly results are subject to wide fluctuations.

We expect that any relatively large sales that we may receive from time to time in the future would have a significant impact on our product and licenses revenues in the quarter in which we recognize revenues from these sales. Large sales make our net revenues and operating results more likely to vary from quarter to quarter because the number of large sales we receive is expected to vary from period to period. The loss of any particular large sale in any period could be significant. As a result, our operating results could suffer if any large sales are delayed or cancelled in any future period.

If we are unable to introduce new products successfully and to make enhancements to existing products, our growth rates would likely decline and our business, results of operations and competitive position could suffer.

We invest substantial amounts of time and resources in researching and developing new products and enhancing existing products by incorporating additional features, improving functionality and adding other improvements to meet end customers' rapidly evolving demands in our highly competitive industry. For example, we introduced our Advanced DNS Protection in January 2014. From time to time, we also invest in the acquisition of businesses, products or technologies to expand our offerings and help us enter into new growing markets. We typically make these investments without being certain that they will result in products or enhancements that the market will accept or that they will expand our share of those markets. The sizes of the markets currently addressed by our products are not certain, and our ability to grow our business in the future may depend upon our ability to introduce new products or enhance and improve our existing products for those markets or entry into new markets. Our growth would likely be adversely affected if we fail to introduce these new products or enhancements, fail to manage successfully the transition to new products from the products they are replacing or do not invest our development efforts in appropriate products or enhancements for significant new markets, or if these new products or enhancements do not attain market acceptance.

Our new products or enhancements could fail to attain sufficient market acceptance for many reasons, including:     

• the timeliness of the introduction and delivery of our products or enhancements;

• our failure or inability to predict changes in our industry or end customers' demands or to design products or enhancements that meet end customers' increasing demands;

• defects, errors or failures in any of our products or enhancements;

• the inability of our products and enhancements to interoperate effectively with products from other vendors or to operate successfully in the networks of prospective end customers;

• negative publicity about the performance or effectiveness of our products or enhancements;

• reluctance of end customers to purchase products that incorporate elements of open source software;

• failure of our channel partners to market, support or distribute our products or enhancements effectively; and

• changes in government or industry standards and criteria.

Our products or enhancements may have limited value to us if they fail to achieve market acceptance, and there can be no assurance that our sales efforts will be effective or that we will realize a positive return on any of these investments, even if the resultant products or enhancements achieve market acceptance. 

Our end customers expect timely introduction of new products and enhancements to respond to new feature requests. Since developing new products or new versions of, or add-ons to, our existing products is complex, the timetable for their commercial release is difficult to predict and may vary from historical experience, which could result in delays in their introduction from anticipated or announced release dates. We may not offer updates as rapidly as our end customers require or expect. If we do not respond to the rapidly changing needs of our end customers by developing and introducing on a timely basis new and effective products, features, upgrades and services that can respond adequately to their needs, our competitive position, business and growth prospects will be harmed.

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Sales of our Trinzic™ DDI family of products generate most of our products and licenses revenue, and if we are unable to continue to grow sales of these products, our operating results and profitability will suffer.

Historically, we have derived substantially all of our products and licenses revenue from sales of products in our Trinzic DDI family and their predecessors, and we expect to continue to derive a significant majority of our products and licenses revenue from sales of our Trinzic DDI family of products for the foreseeable future. A decline in the price of these products and related services, whether due to competition or otherwise, or our inability to increase sales of these products, would harm our business and operating results more seriously than it would if we derived significant revenue from a variety of product lines and services. Our future financial performance will also depend upon successfully developing and selling enhanced versions of our Trinzic DDI family of products. If we fail to deliver product enhancements, new releases or new products that end customers want, it will be more difficult for us to succeed. In addition, our strategy depends upon our products being able to solve critical network management problems for our end customers. If our Trinzic DDI family of products is unable to solve these problems for our end customers or if we are unable to sustain the high levels of innovation in our Trinzic DDI product feature set needed to maintain leadership in what will continue to be a competitive market environment, our business and results of operations will be harmed.

The demand for our automated network control solution and related services may not grow as we expect.

The demand for automated network control depends upon the increasing size and complexity of networks, which may be driven by the rapid growth of new network-connected devices and applications, the adoption of IPv6 and the proliferation of virtualization and cloud computing. The market for automated network control products has increased in recent years as organizations have deployed more devices and applications on their networks and increased the number of virtual machines in use. Our business plan assumes that the demand for automated network control will increase based on the foregoing factors. Ultimately, however, the factors driving demand for automated network control may not develop as quickly as we anticipate, or at all, and the growth of our business and results of operations may be adversely affected.

If we are unable to attract new end customers or to sell additional products to our existing end customers, our revenue growth will be adversely affected and our net revenue could decrease.

To increase our net revenue, we must continually add new end customers and sell additional products to existing end customers. In recent periods, we have been adding personnel and other resources to our sales function as we focus on growing our business, entering new markets and increasing our market share, and we expect to incur significant additional expenses in expanding our sales and development personnel and our international operations in order to achieve revenue growth. In addition, we expect our sales and marketing expenses to increase in absolute dollars as we expand our sales and marketing efforts worldwide and expand our marketing programs and relationships with current and future channel partners and end customers. The return on these and future investments may be lower, or may be realized more slowly, than we expect. If we do not achieve the benefits anticipated from our investments, or if the achievement of these benefits is delayed, our growth rates will decline and our operating results would likely be adversely affected.

We compete in rapidly evolving markets, and our failure to respond quickly and effectively to changing market requirements could cause our business and key operating metrics to decline.

The automated network control market is characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent introductions of new products and services. For example, in order to be competitive, our solution must be capable of operating with and managing an ever increasing array of network devices and an increasingly complex network environment. In some cases, the ability of our solution to interoperate with and manage third-party devices may require licenses from the device manufacturers or other third parties, and we may not be able to obtain necessary licenses on acceptable terms or at all. In addition, our solution must be compatible with industry standards for networks. As new networking devices are introduced and standards in the networking market evolve, we may be required to modify our products and services to make them compatible with these new devices and standards. Likewise, if our competitors introduce new products and services that compete with ours, we may be required to reposition our product and service offerings or to introduce new products and services in response to that competitive pressure. We may not be successful in modifying our current products or introducing new ones in a timely or appropriately responsive manner, or at all. If we fail to address these shifts in the competitive landscape successfully, our business and operating results could be materially harmed.

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Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our operating results to fluctuate significantly.

The timing of our sales and revenue recognition is difficult to predict because of the length and unpredictability of our products’ sales cycles. A sales cycle is the period between initial contact with a prospective end customer and any sale of our products. End customer orders often involve the purchase of multiple products. These orders are complex and difficult to complete because prospective end customers generally consider a number of factors over an extended period of time before committing to purchase automated network control products, such as the solution we sell. End customers often view the purchase of our products as a significant and strategic decision and require considerable time to evaluate, test and qualify our products prior to making a purchase decision and placing an order. The length of time that end customers devote to their evaluation, contract negotiation and budgeting processes varies significantly. The length of our products’ sales cycles typically ranges from three to twelve months but can be more than eighteen months. During the sales cycle, we expend significant time and money on sales and marketing activities and make investments in evaluation equipment, all of which lower our operating margins, particularly if no sale occurs. Even if an end customer makes a decision to purchase our products, there are many factors affecting the timing of our recognition of revenue, which makes our revenue difficult to forecast. For example, there may be unexpected delays in an end customer’s internal procurement processes, particularly for some of our larger end customers for which our products represent a very small percentage of their total procurement activity. There are many other factors specific to end customers that contribute to the timing of their purchases and the variability of our revenue recognition, including the strategic importance of a particular project to an end customer, budgetary constraints and changes in their personnel. Even after an end customer makes a purchase, there may in some cases be circumstances or terms relating to the purchase that delay our ability to recognize revenue from that purchase. In addition, the significance and timing of our product enhancements, and the introduction of new products by our competitors, may also affect end customers’ purchases. For all of these reasons, it is difficult to predict whether a sale will be completed, the particular fiscal period in which a sale will be completed or the period in which revenue from a sale will be recognized. If our sales cycles lengthen, our net revenue could be lower than expected, which would have an adverse impact on our operating results and could cause our stock price to decline.

We compete in highly competitive markets, and competitive pressures from existing and new companies may adversely impact our business and operating results.

The markets in which we compete are highly competitive. We expect competition to intensify in the future as existing competitors and new market entrants introduce new products into our markets. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and our failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results and financial condition. If we do not keep pace with product and technology advances and otherwise keep our product offerings competitive, there could be a material and adverse effect on our competitive position, revenue and prospects for growth.

We compete with large technology integrators, such as BMC Software, Inc., EMC Corporation, Hewlett-Packard Company, International Business Machines Corporation and Microsoft Corporation, telecommunication equipment providers, such as Alcatel-Lucent and BT Group plc, and specialized technology providers, such as BlueCat Networks, Inc., EfficientIP SAS and Nominum, Inc. We also seek to replace network control tools and processes in which end customers have made significant investments. These tools and processes may have been purchased or internally-developed based on open source software or other technology, and end customers may be reluctant to adopt a new solution that replaces or changes their existing tools and processes.

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Many of our competitors are substantially larger and have greater financial, technical, research and development, sales and marketing, manufacturing, distribution and other resources and greater name recognition. We could also face competition from new market entrants, some of which might be our current technology partners. Many of our existing and potential competitors enjoy substantial competitive advantages, such as:

• longer operating histories;

• the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products;

• broader distribution and established relationships with channel partners;

• access to larger end customer bases;

• greater end customer support;

• greater resources to make acquisitions;

• larger intellectual property portfolios;

• the ability to bundle competitive offerings with other products and services;

• less stringent accounting requirements, resulting in greater flexibility in pricing and terms; and

• lower labor and development costs.

As a result, increased competition could result in fewer end customer orders, price reductions, reduced operating margins and loss of market share. Our competitors also may be able to provide end customers with capabilities or benefits different from or greater than those we can provide in areas such as technical qualifications or geographic presence, or to provide end customers a broader range of products, services and prices. In addition, large competitors may have more extensive relationships within existing and potential end customers that provide them with an advantage in competing for business with those end customers. Our ability to compete will depend upon our ability to provide a better solution than our competitors at a competitive price. We may be required to make substantial additional investments in research, development, marketing and sales in order to respond to competition, and there is no assurance that these investments will achieve any returns for us or that we will be able to compete successfully in the future. 

We also expect increased competition if our market continues to expand. Conditions in our market could change rapidly and significantly as a result of technological advancements or other factors. In addition, current or potential competitors may be acquired by third parties that have greater resources available. As a result of these acquisitions, our current or potential competitors might take advantage of the greater resources of the larger organization to compete more vigorously or broadly with us. In addition, continued industry consolidation might adversely impact end customers’ perceptions of the viability of smaller and even medium-sized networking companies and, consequently, end customers’ willingness to purchase from those companies.

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Acquisitions and investments could result in operating difficulties, dilution and other harmful consequences.

We expect to continue to evaluate and enter into discussions regarding potential strategic transactions. These transactions could be material to our financial condition and results of operations. The process of integrating businesses and technology has created unforeseen operating difficulties and expenditures as would the integration of any future acquisitions. The areas where we face risks include:

• implementation or remediation of controls, procedures and policies at the acquired company;

• diversion of management time and focus from operating our business to addressing acquisition integration challenges;

• coordination of product, engineering and sales and marketing functions;

• transition of the acquired company’s operations, users and end customers onto our existing platforms;

• retention of employees from the acquired company;

• cultural challenges associated with integrating employees from the acquired company into our organization;

• integration of the acquired company's accounting, management information, human resources and other administrative systems;

• liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

• litigation or other claims in connection with the acquired company, including claims from terminated employees, end customers, former stockholders or other third parties;

• in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

• diversion of engineering resources away from development of our core products; and

• failure to continue to develop the acquired technology successfully.  

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses or the write-off of goodwill, any of which could harm our financial condition. Also, the anticipated benefits of any acquisitions may not materialize.

The developing and rapidly evolving nature of our business and the markets in which we operate may make it difficult to evaluate our business. 

Since our inception in 1999 we have been creating products for the developing and rapidly evolving market for automated network control. Our initial products were appliances that supported reliable connectivity to networks. We have expanded our product focus through internal development and acquisitions of products and technologies. Acquisitions of this kind may cause uncertainties related to their integration into our business. In addition, we may have difficulty in our business and financial planning because of the developing nature of the markets in which we operate and the evolving nature of our business. Because we depend in part on market acceptance of our products, it is difficult to evaluate trends that may affect our business and whether our expansion will be profitable. Thus, any predictions about our future revenue and expenses may not be as accurate as they would be if our business and market were more mature and stable.

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Adverse economic conditions may adversely impact our business.

Our business depends on the overall demand for IT and on the economic health of our current and prospective end customers. In addition, the purchase of our products is often discretionary and may involve a significant commitment of capital and other resources. General worldwide economic conditions have experienced significant instability in recent years, impacting availability of credit and business confidence and activity and causing other difficulties that may affect one or more of the industries to which we sell our products and services. If economic conditions in the United States, Europe and other key markets for our products continue to remain uncertain or deteriorate further, many end customers may delay or reduce their IT spending. This could result in reductions in sales of our products and services, longer sales cycles, slower adoption of new technologies and increased price competition. Any of these events would likely harm our business, operating results and financial condition. In addition, there can be no assurance that IT spending levels will increase following any recovery.

We base our inventory purchasing decisions on our forecasts of end customer demand, and if our forecasts are inaccurate, our operating results could be materially harmed.

We place orders with our third-party manufacturers based on our forecasts of our end customers’ requirements and forecasts provided by our channel partners. These forecasts are based on multiple assumptions, each of which might cause our estimates to be inaccurate, affecting our ability to provide products to our customers. When demand for our products increases significantly, we may not be able to meet it on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited supply and maintain positive customer relations, or we may incur additional costs to rush the manufacture and delivery of additional products. If we or our channel partners underestimate end customer demand, we may forego revenue opportunities, lose market share and damage our end customer relationships. Conversely, if we overestimate end customer demand, we may maintain more finished goods or raw materials inventory than we are able to sell when we expect to or at all. If our channel partners overestimate end customer demand, our channel partners may accumulate excess inventory, which could cause a reduction of purchases from us in future quarters. As a result, we could have excess or obsolete inventory, resulting in a decline in its value, which would increase our cost of revenue and reduce our liquidity. Our failure to manage inventory accurately relative to demand would adversely affect our operating results.

We rely on our channel partners, including distributors, integrators, managed service providers and value-added resellers. A decrease in their sales of our products would materially and adversely affect our operating results.

A significant majority of our net revenue is generated from sales through our channel partners, including third-party distributors, integrators, managed service providers and value-added resellers, or VARs, that market or sell networking equipment, software and other products and services to end customers. We expect these channel partners to continue to have a similar impact on our net revenue for the foreseeable future, as we invest in and expand our channel relationships, particularly those with large managed service providers. Accordingly, our future growth will depend in part on our channel partners’ ability to market and sell our products and services. In general, our contracts with our channel partners do not contain minimum purchase commitments and allow them to exercise significant discretion regarding the promotion of our products and services, meaning our channel partners could cease to sell our products and services, choose to market, sell and support products and services that are competitive with ours or choose to devote more resources to the marketing, sales and support of those competitive products. As a result, our net revenue would decrease if our competitors were effective in providing incentives to existing and potential channel partners to favor their products over ours or to prevent or reduce sales of our products. Our net revenue might also be negatively affected by our failure to hire and retain sufficient qualified sales personnel internally since our channel partners depend on significant support from our internal sales personnel. Even if our channel partners actively and effectively promote our products and services, there can be no assurance that their efforts will result in growth of our net revenue. In addition, to the extent we fail to attract, train and maintain a sufficient number of high-quality channel partners, our business, operating results and financial condition could be materially and adversely affected. Recruiting and retaining qualified channel partners, particularly large managed service providers, is difficult. Training new channel partners regarding our technology and products requires significant time and resources, and it may take several months or more to achieve significant sales from new channel partners. We may also change our channel distribution model in one or more regions, such as by adding a distribution tier to our sales channel in North America to support our VARs, which change might not improve our channel partners’ effectiveness and could result in decreases to our gross margins and declining profitability. In order to develop and expand our distribution channels, we must continue to scale and improve our processes and procedures that support these channels, including investment in systems and training, and those processes and procedures may become increasingly complex and difficult to manage. 

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By relying on channel partners, we may in some cases have little contact with the end customers of our products, thereby making it more difficult for us to ensure proper delivery, installation and support of our products, service ongoing end customer requirements and respond to evolving end customer needs. In addition, our use of channel partners could subject us to lawsuits, potential liability, reputational harm and other negative consequences if, for example, a sales channel partner misrepresents the functionality of our products or services to end customers or violates laws or our corporate policies.

    In particular, violations of laws or key control policies by our channel partners, despite our efforts to prevent them, could result in delays in revenue recognition, financial reporting misstatements, fines, penalties, or the prohibition of the importation or exportation of our products and services and could have a material adverse effect on our business and results of operations. Accordingly, if we fail to manage our channel partners effectively, our business would be seriously harmed.

We are exposed to the credit risk of our channel partners and end customers, which could result in material losses and negatively impact our operating results.

Most of our sales are on an open credit basis, with typical payment terms of 30 days. Because of local customs or conditions, payment terms may be longer in some circumstances and markets. If any of the channel partners or end customers responsible for a significant portion of our net revenue becomes insolvent or suffers a deterioration in its financial or business condition and is unable to pay for our products, our results of operations could be harmed.

Our business depends on end customers renewing their maintenance and support contracts. Any decline in maintenance renewals could harm our future operating results.

We typically sell our products with maintenance and support as part of the initial purchase, and a substantial portion of our annual net revenue comes from renewals of maintenance and support contracts. Our end customers have no obligation to renew their maintenance and support contracts after the expiration of the initial period, and they may elect not to renew their maintenance and support contracts, to renew their maintenance and support contracts at lower prices through alternative channel partners or to reduce the product quantity under their maintenance and support contracts, thereby reducing our future net revenue from maintenance and support contracts. If our end customers do not renew their maintenance and support contracts or if they renew them on terms that are less favorable to us, our net revenue may decline and our business will suffer.

Our ability to sell our products is highly dependent on the quality of our support and services offerings, and our failure to offer high-quality support and services could have a material and adverse effect on our business and results of operations.

Once our products are deployed within our end customers’ networks, our end customers depend on our support organization and our channel partners to resolve any issues relating to our products. High-quality support is critical for the successful marketing and sale of our products. If we or our channel partners do not assist our end customers in deploying our products effectively, succeed in helping our customers resolve post-deployment issues quickly, or provide ongoing support, it could adversely affect our ability to sell our products to existing end customers and could harm our reputation with potential end customers. In addition, as we expand our operations internationally, our support organization will face additional challenges, including those associated with delivering support, training and documentation in languages other than English. Our failure or the failure of our channel partners to maintain high-quality support and services could have a material and adverse effect on our business and operating results.

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Claims by others that we infringe their intellectual property rights could harm our business.

Our industry is characterized by vigorous pursuit and protection of intellectual property rights, which has resulted in protracted and expensive litigation for many companies. Third parties have asserted and may in the future assert claims of misappropriation of trade secrets or infringement of intellectual property rights against us or against our end customers or channel partners for which we may be liable. 

As our business expands, the number of products and competitors in our markets increases and product overlaps occur, infringement claims may increase in number and significance. In this regard, we have been sued by Versata Software, Inc. for alleged infringement of four of Versata's patents. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. In addition, we currently have a more limited portfolio of issued patents than our major competitors, and therefore may not be able to utilize our intellectual property portfolio effectively to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties. Further, litigation may involve patent holding companies or other adverse patent owners that have no relevant product revenue and against which our potential patents may provide little or no deterrence. In addition, many potential litigants have the capability to dedicate substantially greater resources than we can to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing products or performing certain services. We could also be required to seek a license for the use of that intellectual property, which might not be available on commercially acceptable terms or at all. Alternatively, we might be required to develop non-infringing technology, which could require significant effort and expense and might ultimately not be successful.

Failure to protect our intellectual property rights could adversely affect our business.

Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under patent and other intellectual property laws of the United States and foreign jurisdictions so that we can prevent others from using our inventions and proprietary information. If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology and our business might be harmed. In addition, we might incur significant expenses in defending our intellectual property rights. Any of our patents, copyrights, trademarks or other intellectual property rights could be challenged by others or invalidated through administrative process or litigation. 

We could be required to spend significant resources to monitor and protect our intellectual property rights. In this regard, we have in the past initiated and may in the future initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not resolved in our favor, could result in significant expense to us and divert the efforts of our management and technical personnel, which might adversely affect our business, operating results and financial condition.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.

Our agreements with customers and commercial partners include indemnification provisions, under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement and, in some cases, for damages caused by us to property or persons or other third-party claims. The term of these indemnity provisions is generally perpetual after execution of the corresponding product sale agreement. Large indemnity payments could harm our business, operating results and financial condition.

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We depend on third-party manufacturers for the supply and quality of our products.

We outsource the manufacturing of the substantial majority of our products to Flextronics Telecom Systems, Ltd., an affiliate of Flextronics International Ltd. Some of our products, including the Trinzic 100 and the Trinzic 4000 series are manufactured by other third parties. These standard contract manufacturer arrangements subject us to the risk that the manufacturer does not provide our customers with the quality and performance that they expect or that the manufacturer does not provide us with an adequate supply of products. Our orders typically represent a relatively small percentage of the overall orders received by these manufacturers from their customers. As a result, fulfilling our orders may not be considered a priority in the event our manufacturer is constrained in its ability to fulfill all of its customer obligations in a timely manner. We must also accurately predict the number of products that we will require. If we overestimate our requirements, we may incur liabilities for excess inventory, which could negatively affect our gross margins. Conversely, if we underestimate our requirements, our manufacturer and suppliers may have inadequate supplies of the materials and components required to produce our products. In addition, we acquire some of our other products and components from sole-source suppliers. This could result in an interruption of the manufacturing of our products, delays in shipments and deferral or loss of revenue. Quality or performance failures of our products or changes in our manufacturers' financial or business condition could disrupt our ability to supply quality products to our customers and thereby have a material and adverse effect on our business and operating results.

Some of the components and technologies used in our products are purchased and licensed from a single source or a limited number of sources. The loss of any of these suppliers might cause us to incur additional transition costs, result in delays in the manufacturing and delivery of our products, or cause us to carry excess or obsolete inventory and could require us to redesign our products.

Although supplies of our components are generally available from a variety of sources, we currently depend on a single source or a limited number of sources for most components included in our products. For example, the chipsets and motherboards that we use in the products manufactured by Flextronics are currently available only from a limited number of sources, and neither we nor, to our knowledge, this manufacturer have entered into supply agreements with these sources. We have also entered into license agreements with some of our suppliers for technologies that are used in our products.

As there are no other sources for identical components and technologies, if we lost any of these suppliers, we might not be able to sell our products for a significant period of time, and we could incur significant costs to redesign our hardware and software to incorporate components or technologies from alternative sources or to qualify alternative suppliers. Our reliance on a single source or a limited number of suppliers involves a number of additional risks, including risks related to: 

• supplier capacity constraints;

• price increases;

• timely delivery;

• component quality; and

• natural disasters.

In addition, for certain components for which there are multiple sources, we are subject to potential price increases and limited availability as a result of market demand for these components. In the past, unexpected demand for computer and network products has caused worldwide shortages of certain electronic parts. If similar shortages occur in the future, our business would be adversely affected. We carry very little inventory of our products, and we and our manufacturer rely on our suppliers to deliver necessary components in a timely manner. We and our manufacturer rely on purchase orders rather than long-term contracts with these suppliers, and as a result we or our manufacturer might not be able to secure sufficient components, even if they were available, at reasonable prices or of acceptable quality to build products in a timely manner and, therefore, might not be able to meet customer demands for our products, which would have a material and adverse effect on our business, operating results and financial condition.

We rely on the availability of third-party licenses and, in the future, if these licenses are available to us only on less favorable terms or not available at all, our business and operating results would be harmed.

Our products include software and other technology licensed from third parties. It may be necessary in the future to renew licenses relating to various aspects of these products or to seek additional licenses for existing or new products. There can be no assurance that the necessary licenses would be available on acceptable terms or at all. The inability to obtain certain licenses or other rights or to obtain those licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could result in delays in product releases until such time, if ever, as equivalent technology could be identified, licensed or developed and integrated into our products and might have a material adverse effect on our business, operating results and financial condition.

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Our international sales and operations subject us to additional risks that may materially and adversely affect our business and operating results.

During three months ended April 30, 2014 and 2013 and nine months ended April 30, 2014 and 2013, 41.1%, 37.5%, 38.3% and 38.5% of our net revenue were derived from customers outside of the United States. During three and nine months ended April 30, 2014, we experienced slower revenue growth in the United States relative to revenue growth internationally. There can be no assurance that this trend will change in the foreseeable future. Sales to our international customers have typically been denominated in U.S. dollars. Fluctuations in currency exchange rates could cause our products to become relatively more expensive to end customers in a particular country, leading to a reduction in sales or profitability in that country. We are also exposed to movements in foreign currency exchange rates relating to operating expenses associated with our operations and personnel outside the United States. We have research and development personnel in Canada and France, engage contractors in Belarus, India and Thailand, and have testing and support personnel in India, and we expect to expand our offshore development efforts. In addition, we have sales and support personnel in numerous countries worldwide. We expect to continue to hire personnel in additional countries. Our international operations subject us to a variety of risks, including:

• the difficulty of managing and staffing international offices and the increased travel, infrastructure and legal compliance costs associated with numerous international locations;

• reduced demand for technology products outside the United States;

• difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging markets;

• tariffs and trade barriers, export regulations and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;

• increased exposure to currency exchange rate risk;

• heightened exposure to political instability, war and terrorism;

•  added legal compliance obligations and complexity;

• reduced protection for intellectual property rights in some countries;

• multiple conflicting tax laws and regulations;

• the need to localize our products for international end customers; and

• the increased cost of terminating employees in some countries.

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and manage effectively these and other risks associated with our international operations. Our failure to manage any of these risks successfully could harm our international operations and reduce our international sales, adversely affecting our business, operating results and financial condition.

In addition, we may be subject to increasing international environmental laws and regulations such as laws governing the hazardous material content of our products and laws relating to the recycling of electrical and electronic equipment. The laws and regulations to which we are currently subject include the EU Regulation of Hazardous Substances Directive and the EU Waste Electrical and Electronic Equipment Directive (the “Environmental Directives”) as well as the legislation of the EU member states implementing the Environmental Directives. Similar laws and regulations have been passed or are pending in China, South Korea, Norway and Japan and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations. We have incurred costs to comply with the Environmental Directives in the past, and we may be required to incur additional costs in the future to comply with similar laws and regulations as they are introduced in other countries and could disrupt our operations or logistics if we do not have sufficient time to adjust our products and processes. Our failure to comply with such environmental rules and regulations could result in reduced sales of our products, increased costs, substantial product inventory write-offs, reputational damage, penalties and other sanctions.

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We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

Because we incorporate encryption technology into our products, certain of our products are subject to U.S. export controls and may be exported outside the United States only with the required export license or through an export license exception. If we continue to develop and expand our security related products and services, some or all of these products may be subject to more restrictive export and import requirements than our historic products, which would require additional administration and could result in limiting our ability to offer our products and services in some countries or to some end customers. If we were to fail to comply with United States export licensing, United States Customs regulations and import regulations, United States economic sanctions and other countries' import and export laws, we could be subject to substantial civil and criminal penalties, including fines against us and incarceration for responsible employees and managers, and the possible loss of export or import privileges. In addition, if our channel partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected through reputational harm and penalties. Obtaining the necessary export license for a particular sale may be time-consuming and may result in the delay of product launches. In addition, various countries regulate the import of certain encryption technology, including import permitting/licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our end customers' ability to implement our products in those countries. Changes in our products or changes in export and import regulations may create delays in the introduction of our products in international markets, prevent our end customers with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. Changes in our products or changes in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

Our use of and reliance on research and development resources in foreign countries may expose us to unanticipated costs or events.

We have significant research and development centers in Canada and France and have significant numbers of contractors in Belarus, India and Thailand. There can be no assurance that our reliance upon research and development resources in foreign countries will enable us to achieve meaningful cost reductions or greater resource efficiency. Further, our research and development efforts and other operations in foreign countries involve significant risks, including:

• difficulty hiring and retaining appropriate engineering personnel because of intense competition for engineers and resulting wage inflation;

• difficulties regarding the transfer of knowledge related to our technology and resulting exposure to misappropriation of intellectual property or information that is proprietary to us, our end customers and other third parties;

• heightened exposure to change in the economic, security and political conditions in developing countries;

• fluctuations in currency exchange rates and difficulties of regulatory compliance in foreign countries; and

• interruptions to our operations in India or Thailand as a result of typhoons, floods and other natural catastrophic events, as well as man-made problems such as power disruptions or terrorism.

Difficulties resulting from the factors above and other risks related to our operations in foreign countries could expose us to increased expense, impair our development efforts and harm our competitive position.

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If we fail to manage future growth effectively, our business would be harmed.

We operate in emerging markets and have experienced, and may continue to experience, significant expansion of our operations. This growth has placed, and any future growth would continue to place, a strain on our employees, management systems and other resources. Managing our growth will require significant expenditures and allocation of valuable management resources. Further international expansion may be required for our continued business growth, and managing any international expansion would require additional resources and controls. If we fail to achieve the necessary level of efficiency in our organization as it grows, our business, operating results and financial condition would be harmed.

If we are unable to hire, retain and motivate qualified personnel, our business would suffer.

Our future success depends, in part, on our ability to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract and retain additional qualified personnel or delays in hiring required personnel, particularly in engineering and sales, could seriously harm our business, financial condition and results of operations. Any of our employees may terminate their employment at any time. Competition for highly skilled personnel is frequently intense, especially in the San Francisco Bay Area, where we have a substantial presence and need for highly skilled personnel. In addition, a large portion of our employee base is substantially vested in significant stock options, and their ability to exercise those options and sell their stock might result in a higher than normal turnover rate. Also, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information to us.

We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results and financial condition.

Our future performance depends on the continued services and continuing contributions of our senior management and other key employees to execute on our business plan, and to identify and pursue new opportunities and product innovations. The loss of the services of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives and could adversely affect our business, financial condition and results of operations.

We expect our gross margin to vary over time, and our current level of gross margin may not be sustainable.

Our level of gross margin may not be sustainable and may be adversely affected by numerous factors, including:

• increased price competition;

• changes in end customer or product and service mix;

• increased inbound shipping charges;

• our inability to maintain or reduce the amount we pay our third-party manufacturers;

• increases in material or labor costs;

• increased costs of licensing third-party technologies that are used in our products;

• carrying costs of excess inventory, inventory holding charges and obsolescence charges that may be passed through to us by our third-party manufacturers;

• changes in our distribution channels or our arrangements with our distributors and VARs;

• increased warranty and repair costs; and

• the introduction of new appliance models, which may have lower margins than our existing products.

For example, in January 2013, we introduced new smaller form factor appliance, which is designed for retail locations and which we expect to have lower gross margins. Depending on the volumes of sales of such new appliances and the overall mix of product models in any given quarter, gross margins could be lower which would impact our operating results.

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Seasonality may cause fluctuations in our net revenue and operating results.

We operate on a July 31 fiscal year-end and believe that there are significant seasonal factors which may cause the second and fourth quarters of our fiscal year to have greater product revenue than our first and third fiscal quarters. We believe that this seasonality results from a number of factors, including: 

• end customer procurement, budget and deployment cycles in the government and education sectors, which potentially result in stronger order flow in our second fiscal quarter;

• one or more of our larger end customers with a December 31 fiscal year-end choosing to spend remaining budgets before their year-end, which potentially results in a positive impact on our product revenue in the second quarter of our fiscal year;

• the timing of our annual training for the entire sales force in our first fiscal quarter, which, combined with the strong fourth quarter sales, can potentially cause our first fiscal quarter to be seasonally weak, and

• seasonal reductions in business activity during August in the United States, Europe and certain regions, which have a negative impact on our first fiscal quarter revenue.

Our rapid historical growth may have reduced the impact of seasonal or cyclical factors that might have influenced our business to date. As our increasing size causes our growth rate to slow, seasonal or cyclical variations in our operations may become more pronounced over time and may materially affect our results of operations.

If we are not able to maintain and enhance our brand and reputation, our business and operating results may be harmed in tangible or intangible ways.

We believe that maintaining and enhancing our brand and reputation are critical to our relationships with, and our ability to attract, new end customers, technology partners and employees. The successful promotion of our brand will depend largely upon our ability to continue to develop, offer and maintain high-quality products and services, our marketing and public relations efforts, and our ability to differentiate our products and services successfully from those of our competitors. Our brand promotion activities could involve significant expenditures and may not be successful and may not yield increased revenue. In addition, extension of our brand to products and uses different from our traditional products and services may dilute our brand, particularly if we fail to maintain the quality of products and services in these new areas. If we do not successfully maintain and enhance our brand and reputation, our growth rate may decline, we may have reduced pricing power relative to competitors with stronger brands or reputations, and we could lose end customers or technology partners, all of which would harm our business, operating results and financial condition. 

In addition, from time to time independent industry analysts may provide reviews of our products and services, as well as those of our competitors, and perception of our products in the marketplace may be significantly influenced by these reviews. We have no control over what these industry analysts report, and because industry analysts may influence current and potential end customers, our brand could be harmed if industry analysts do not provide positive reviews of our products or identify them as market leaders.

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If our products contain undetected software or hardware errors, we could incur significant unexpected expenses and lost sales and revenue and we could be subject to product liability claims.

Products such as ours frequently contain undetected software or hardware errors, many of which are identified only when our products are first introduced or as new versions are released. We have experienced errors in the past in connection with our products. We expect that errors will be found from time to time in new or enhanced products after commencement of commercial shipments. Since our products contain components that we purchase from third parties, we also expect our products to contain latent defects and errors from time to time related to those third-party components. These problems may cause us to incur significant warranty and repair costs, process management costs, and costs associated with remanufacturing our inventory. In addition, regardless of the party at fault, errors of these kinds divert the attention of our engineering personnel from our product development efforts, damage our reputation and the reputation of our products, cause significant customer relations problems and can result in product liability claims. The occurrence of these problems could result in the delay or loss of market acceptance of our products and could adversely impact our business, operating results and financial condition.

Our business is subject to the risks of warranty claims, product returns, product liability and product defects.

Real or perceived errors, failures or bugs in our products could result in claims by customers for losses that they sustain. If customers make these types of claims, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem. Liability provisions in our standard terms and conditions of sale, and those of our resellers and distributors, may not be enforceable under some circumstances or may not fully or effectively protect us from customer claims and related liabilities and costs, including indemnification obligations under our agreements with resellers and distributors. The sale and support of our products also entail the risk of product liability claims. We maintain insurance to protect against certain types of claims associated with the use of our products, but our insurance coverage may not adequately cover any such claims. In addition, even claims that ultimately are unsuccessful could result in expenditures of funds in connection with litigation and divert management’s time and other resources.

We depend on the U.S. government for a portion of our sales, which are facilitated through resellers on which we also depend for these sales. Any reductions in sales to the U.S. government, as a result of the loss of reseller relationships or any other reason, could harm our growth.

A significant portion of our sales is made to certain departments of the U.S. government. Nearly all of these sales are made through resellers. Any factors that cause a decline in government expenditures generally or government IT expenditures in particular could cause our net revenue to grow less rapidly or even to decline. For example, it is unclear whether additional U.S. government budget sequestration that may take effect would impact the sales, or the timing of sales, of our products to departments of the U.S. government. The timing of fulfillment under government contracts can also be uncertain. In addition, since in most cases we are unable to fulfill orders from the U.S. government directly, the loss of key reseller relationships could adversely affect our ability to fulfill certain orders from the government until we are able to find and qualify a suitable alternative. This, in turn, would cause revenue to be delayed and could cause sales to be lost.

Our net revenue may decline as a result of reductions in public funding of educational institutions.

We regard sales to universities, colleges and other educational institutions as an important source of net revenue. Many of these institutions receive funding from local tax revenues and from state and federal governments through a variety of programs. Federal, state or local funding of public education may be reduced for a variety of reasons, including budget-driven austerity measures, legislative changes or fluctuations in tax revenues because of changing economic conditions. If funding of public education declines for these or any other reason, our sales to educational institutions might be negatively impacted. Any reduction in spending on IT systems by educational institutions would likely materially and adversely affect our business and results of operations.

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If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. If we are unable to maintain adequate internal control over financial reporting, we might be unable to report our financial information on a timely basis and might suffer adverse regulatory consequences or violate New York Stock Exchange, or NYSE, listing standards. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. We may in the future discover areas of our internal financial and accounting controls and procedures that need improvement. Our internal control over financial reporting will not prevent or detect all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company will be detected. If we are unable to maintain proper and effective internal controls, we may not be able to produce accurate financial statements on a timely basis, which could adversely affect our ability to operate our business and could result in regulatory action, and could require us to restate, our financial statements. Any such restatement could result in a loss of public confidence in the reliability of our financial statements and sanctions imposed on us by the SEC.     

We rely on third parties for the fulfillment of our end customer orders and replacements, and the failure of these third parties to perform could have an adverse effect upon our reputation and our ability to distribute our products, which could cause a material reduction in our net revenue.

We rely on our third-party manufacturers to build and inventory sufficient quantities of our products to fulfill end customer orders, and we also use third parties to transport our products, hold our inventory in local depots in foreign countries and fulfill our end customer replacement requirements. If our third-party agents fail to perform, our ability to deliver our products and to generate revenue would be adversely affected. The failure of our third-party manufacturers and other third-party logistics providers to deliver products in a timely manner could lead to the dissatisfaction of our channel partners and end customers and damage our reputation, which might cause our channel partners or end customers to cancel existing agreements with us and to stop transacting business with us. In addition, this reliance on our third-party manufacturers and third-party logistics providers may impact the timing of our revenue recognition if our providers fail to deliver orders during the prescribed time period. In the event we were unexpectedly forced to change providers, we could experience short-term disruptions in our delivery and fulfillment process that could adversely affect our business.

Our use of open source software could impose limitations on our ability to commercialize our products.

Our products contain software modules licensed for use from third-party authors under open source licenses, including the GNU Public License, the GNU Lesser Public License and the Apache License. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open source licenses contain requirements that we make available source code for modifications or derivative works that we create based upon the type of open source software we use. If we combine our proprietary software with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code of our proprietary software to the public. This could allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of product sales for us.    

The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. In such event, we could be required to seek licenses from third parties in order to continue offering our products and to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could materially and adversely affect our business and operating results.

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Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information.

In order to protect our proprietary technology, processes and methods, we rely in part on confidentiality agreements with our technology partners, employees, consultants, advisors and others. These agreements may not effectively prevent disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of our confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in these cases we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Our reported financial results may be adversely affected by changes in accounting principles applicable to us.

Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and other bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change. Any difficulties in the implementation of new or changed accounting standards could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline. In addition, the SEC has announced a multi-year plan that could ultimately lead to the use of International Financial Reporting Standards by U.S. issuers in their SEC filings. Any such change could have a significant effect on our reported financial results.

If our estimates relating to our critical accounting policies are based on assumptions or judgments that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.

The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates, assumptions and judgments that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If our assumptions change or if actual circumstances differ from those in our assumptions, our operating results may be adversely affected, which could cause our operating results to fall below market expectations and our stock price to decline. Significant estimates, assumptions and judgments used in preparing our consolidated financial statements include those related to revenue recognition, determination of fair value of stock-based awards, valuation of goodwill and intangible assets acquired, impairment of goodwill and other intangible assets, amortization of intangible assets, contingencies and litigation, accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions, allowances for doubtful accounts and sales returns and valuation of inventory.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the U.S. Internal Revenue Code of 1986, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs, to offset future taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes and, if we undergo an ownership change in the future, our ability to utilize our NOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our net operating losses could also be impaired under state law. As a result, we might not be able to utilize a material portion of our NOLs.

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Our future capital needs are uncertain, and we may need to raise additional funds in the future.

We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements for at least the next 12 months. We may, however, need to raise substantial additional capital to: 

• fund our operations;

• continue our research and development

• commercialize new products; or

• acquire companies, in-licensed products or intellectual property.

Our future funding requirements will depend on many factors, including:

• market acceptance of our products and services;

• the cost of our research and development activities;

• the cost of defending, in litigation or otherwise, claims that we infringe third-party patents or violate other intellectual property rights;

• the cost and timing of establishing additional sales, marketing and distribution capabilities;

• the cost and timing of establishing additional technical support capabilities;

• the effect of competing technological and market developments; and

• the market for different types of funding and overall economic conditions.

If we require additional funds in the future, those funds may not be available on acceptable terms, or at all.

We may require additional funds in the future, and we may not be able to obtain those funds on acceptable terms, or at all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or to grant licenses on terms that are not favorable to us. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay, reduce the scope of or eliminate some or all of our development programs. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations. Any of these actions could harm our operating results.

Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.

Our provision for income taxes is subject to volatility and could be adversely affected by the following:

• changes in the valuation of our deferred tax assets;

• foreign or domestic income tax assessments and any related tax interest or penalties;

• expiration of, or lapses in, the research and development tax credit laws;

• tax effects of nondeductible compensation;

• adjustments to the pricing of intercompany transactions and transfers of intellectual property or other assets;

• changes in accounting principles; or

• changes in tax laws and regulations, including changes in taxation of the services provided by our foreign subsidiaries.

Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The accounting guidance for uncertainty in income taxes applies to all income tax positions, including the potential recovery of previously paid taxes, that if settled unfavorably could adversely impact our provision for income taxes or additional paid-in capital. In addition, we are subject to the examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. The outcomes from these examinations might have a material and adverse effect on our operating results and financial condition.

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Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions or terrorism.

Our corporate headquarters is located in the San Francisco Bay Area, a region known for seismic activity. We also have significant testing and support facilities in India, a region known for typhoons, floods and other natural disasters. A significant natural disaster, such as an earthquake, fire or a flood, occurring at our headquarters, at one of our other facilities or where a channel partner or supplier is located could have a material adverse impact on our business, operating results and financial condition. In addition, natural disasters and acts of terrorism could cause disruptions in our or our customers’ businesses, national economies or the world economy as a whole. We also rely on IT systems to communicate among our workforce located worldwide and, in particular, our research and development activities that are coordinated between our corporate headquarters in the San Francisco Bay Area and our operations in other states and countries. Any disruption to our internal communications, whether caused by a natural disaster or by man-made problems, such as power disruptions or terrorism, could delay our research and development efforts. To the extent that these disruptions result in delays or cancellations of customer orders or delays in our research and development efforts or the deployment of our products, our business and operating results would be materially and adversely affected.

System security risks, data protection breaches, cyber-attacks and systems integration issues could disrupt our internal operations, and any such disruption could reduce our expected revenue, increase our expenses, damage our reputation and adversely affect our stock price.

Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential and proprietary information, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that could impede our sales, manufacturing, distribution or other critical functions. 

We manage and store various proprietary information and sensitive or confidential data relating to our business in the “cloud.” Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, including the potential loss or disclosure of that information or data as a result of fraud, trickery or other forms of deception, could expose us to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive. Any disruptions could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales, lower margins or lost customers resulting from these disruptions have adversely affected us in the past, and in the future could adversely affect our financial results, stock price and reputation.

Risks Related to Ownership of Our Common Stock

Our actual operating results may differ significantly from our guidance.

From time to time, we have released, and may continue to release guidance in our quarterly earnings releases, quarterly earnings conference call, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management. These projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public accountants nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person expresses any opinion or any other form of assurance with respect to the projections.    

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Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. We intend to state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges. The principal reason that we release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such persons.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from our guidance and the variations may be material. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock. 

Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this quarterly report could result in the actual operating results being different from our guidance, and the differences may be adverse and material.

The price of our common stock may be volatile, and you could lose all or part of your investment.

In the recent past, stocks generally, and technology stocks in particular, have experienced high levels of volatility. The trading price of our common stock may fluctuate substantially. The trading price of our common stock will depend on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid. Factors that could cause fluctuations in the trading price of our common stock include the following: 

• price and volume fluctuations in the overall stock market from time to time;

• volatility in the market prices and trading volumes of high technology stocks;

• changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

• sales of shares of our common stock by us or our stockholders;

• failure of securities analysts to maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

• the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;

• announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments.

• the public's reaction to our press releases, other public announcements and filings with the SEC;

• rumors and market speculation involving us or other companies in our industry;

• actual or anticipated changes in our results of operations or fluctuations in our operating results;

• actual or anticipated developments in our business or our competitors' businesses or the competitive landscape generally;

• litigation involving us, our industry or both or investigations by regulators into our operations or those of our competitors;

• developments or disputes concerning our intellectual property or other proprietary rights;

• announced or completed acquisitions of businesses or technologies by us or our competitors;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidelines, interpretations or principles;

• any major change in our management;

• general economic conditions and slow or negative growth of our markets; and

• other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices of a particular companies’ securities, securities class action litigations have often been instituted against these companies. For example, following a recent period of volatility in the trading price of our common stock, alleged class actions were filed beginning on May 30, 2014 against us and two of our officers. We may be the target of this type of litigation in the future.

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The outcome of securities class actions is difficult to predict. Plaintiffs in these matters may seek recovery of very large or indeterminate amounts. The monetary and other impact of these actions may remain unknown for substantial periods of time. Accordingly, litigation of this type against us could result in substantial costs to defend or settle these matters and divert our management’s attention and resources, which could seriously harm our business.

If securities or industry analysts issue an adverse or misleading opinion regarding our stock or do not publish research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will rely in part on the research and reports that equity research and other analysts publish about us and our business. We do not control these analysts or the content and opinions included in their reports. The price of our common stock could decline if one or more analysts were to downgrade our common stock or if they were to issue other unfavorable commentary or cease publishing reports about us or our business. If one or more analysts were to cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline. Further, analysts may elect not to provide research coverage of our common stock, and lack of research coverage would likely adversely affect the market price of our common stock.

Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.

Based upon beneficial ownership as of April 30, 2014, our current directors, executive officers, holders of more than 5% of our common stock and their respective affiliates will, in the aggregate, beneficially own approximately 25.8% of our outstanding common stock. These stockholders may be able to exercise a controlling influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have significant influence over our management and policies for the foreseeable future. Some of these persons or entities may have interests that are different from yours. For example, these stockholders may support proposals and actions with which you may disagree or which are not in your interests. The concentration of ownership could delay or prevent a change in control of our company or otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our common stock. In addition, these stockholders, some of which have representatives sitting on our board of directors, could use their voting control to maintain our existing management and directors in office, delay or prevent changes of control of our company, or support or reject other management and board of director proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our capital stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. As a result, you will likely receive a return on your investment in our common stock only if the market price of our common stock increases.

Our charter documents and Delaware law could discourage, delay or prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our restated certificate of incorporation and our restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions. These provisions, among other things: 

• provide for non-cumulative voting in the election of directors;

• provide for a classified board of directors;

• authorize our board of directors, without stockholder approval, to issue preferred stock with terms determined by our board of directors and to issue additional shares of our common stock;

• provide that only our board of directors may set the number of directors constituting our board of directors or fill vacant directorships;

• provide that stockholders may remove directors only for cause;

• prohibit stockholder action by written consent and limit who may call a special meeting of stockholders; and

• require advance notification of stockholder nominations for election to our board of directors and of stockholder proposals.  

These and other provisions in our restated certificate of incorporation and our restated bylaws, as well as provisions under Delaware law, could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the trading price of our common stock being lower than it otherwise would be. 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

There were no unregistered sales of equity securities during the period covered by this report.

Use of Proceeds from Public Offering of Common Stock

On April 19, 2012, the SEC declared effective our Registration Statement on Form S-1 (File No. 333-178925) in connection with our IPO, which closed on April 25, 2012. We received net proceeds of approximately $98.2 million from the offering. Based on our current cash and cash equivalents balance together with cash generated from operations, we do not expect that we will have to utilize any of the net proceeds to fund our operations during the next 12 months. We anticipate that we will use the net proceeds from the offering for working capital and other general corporate purposes, which may include investments in, or acquisitions of complementary businesses, products, services, technologies or other assets, although we have no present commitments or agreements to enter into any material acquisitions or investments. The net proceeds are currently invested in cash, cash equivalents and investments in publicly-traded debt securities which are classified as available-for-sale.

Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Infoblox Inc.
Date: June 5, 2014	By:	/s/ Remo E. Canessa
		Remo E. Canessa Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Exhibit Title
31.1*	Certification of Robert D. Thomas, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Remo E. Canessa, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Robert D. Thomas, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Remo E. Canessa, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS†	XBRL Instance Document
101.SCH†	XBRL Taxonomy Schema Linkbase Document
101.CAL†	XBRL Taxonomy Calculation Linkbase Document
101.DEF†	XBRL Taxonomy Definition Linkbase Document
101.LAB†	XBRL Taxonomy Labels Linkbase Document
101.PRE†	XBRL Taxonomy Presentation Linkbase Document

*

Filed herewith.

†

Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or the Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert D. Thomas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Infoblox Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit commirttee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 5, 2014
	/s/ Robert D. Thomas
	Robert D. Thomas
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Remo E. Canessa, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Infoblox Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 5, 2014
	/s/ Remo E. Canessa
	Remo E. Canessa
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

I, Robert D. Thomas, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. the Quarterly Report on Form 10-Q of Infoblox Inc. for the quarter ended April 30, 2014, as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Infoblox Inc.

Date: June 5, 2014
	/s/ Robert D. Thomas
	Robert D. Thomas
	President and Chief Executive Officer (Principal Executive Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Infoblox Inc. and will be retained by Infoblox Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICE

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Remo E. Canessa, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. the Quarterly Report on Form 10-Q of Infoblox Inc. for the quarter ended April 30, 2014, as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Infoblox Inc.

Date: June 5, 2014
	/s/ Remo E. Canessa
	Remo E. Canessa
	Chief Financial Officer (Principal Financial Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Infoblox Inc. and will be retained by Infoblox Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Stockholders’ Equity and Employee Benefit Plans (Determination of Fair Value) (Details) (USD $)	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 years 0 months 29 days	6 years 0 months 29 days	6 years 0 months 29 days	6 years 0 months 29 days
Risk-free interest rate	1.89%	1.06%	1.85%	0.97%
Expected volatility	56.00%	53.00%	54.00%	53.00%
Dividend rate	0.00%	0.00%	0.00%	0.00%
Weighted average fair value per share, stock options (in dollars per share)	$ 11.69	$ 10.69	$ 18.64	$ 9.78
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Dividend rate			0.00%	0.00%
Weighted average fair value per share, stock options (in dollars per share)			$ 12.87	$ 7.07
Shares employees purchased			200,000.0	300,000.0
Average price per share	$ 15.26	$ 13.60	$ 15.26	$ 13.60
Minimum [Member] | Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)			6 months	6 months
Risk-free interest rate			0.09%	0.12%
Expected volatility			55.00%	53.00%
Maximum [Member] | Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)			2 years	2 years
Risk-free interest rate			0.38%	0.26%
Expected volatility			67.00%	58.00%

XML

Net Income (Loss) Per Share (Details) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	3,448	5,584	3,693	6,198
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	1,789	441	1,707	182
Employee Stock Purchase Plan [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	15	95	115	40

XML

Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014 segment	Apr. 30, 2013	Jul. 31, 2013
Revenues from External Customers and Long-Lived Assets [Line Items]
Number of reportable segments			1
Net revenue	$ 61,022	$ 58,035	$ 185,425	$ 161,979
Property and equipment, net	18,540		18,540		18,370
Americas [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net revenue	38,064	38,456	121,710	105,499
Property and equipment, net	18,030		18,030		17,997
EMEA [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net revenue	15,118	13,129	42,918	39,663
Property and equipment, net	266		266		149
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net revenue	7,840	6,450	20,797	16,817
Property and equipment, net	244		244		224
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Net revenue	35,900	36,200	114,400	99,500
Property and equipment, net	$ 18,000		$ 18,000		$ 18,000

XML

Cash Equivalents, Short-Term Investments, Restricted Cash and Fair Value Measurements

9 Months Ended

Apr. 30, 2014

Financial Instruments, Owned, at Fair Value [Abstract]

Cash Equivalents, Short-term Investments, Restricted Cash and Fair Value Measurements

CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, RESTRICTED CASH AND FAIR VALUE MEASUREMENTS

Cash Equivalents, Short-term Investments and Restricted Cash

The following table summarizes our cash equivalents, short-term investments and restricted cash as of April 30, 2014:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(In thousands)
Cash equivalents:
Money market funds	$	5,898	$	—	$	—		$	5,898
Short-term investments:
U.S. Treasury securities	122,499		74		(18		)	122,555
U.S. government agency securities	34,599		13		(12		)	34,600
FDIC-backed certificates of deposit	12,880		6		(6		)	12,880
Total short-term investments	169,978		93		(36		)	170,035
Restricted cash:
U.S. Treasury securities	3,409		3		—			3,412
Total cash equivalents, short-term investments and restricted cash	$	179,285	$	96	$	(36	)	$	179,345

The following table presents the contractual maturities of our short-term investments which are classified as available-for-sale securities as of April 30, 2014:

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due within one year	$	91,285	$	91,329
Due after one year through two years	78,693		78,706
Total	$	169,978	$	170,035

We classify our available-for-sale investments as short-term investments in our condensed consolidated balance sheet based on management's intention to have the funds available for use in operations or strategic investments rather than actual maturity dates.     

The following table summarizes our cash equivalents, short-term investments and restricted cash as of July 31, 2013:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(In thousands)
Cash equivalents:
Money market funds	$	11,133	$	—	$	—		$	11,133
Short-term investments:
U.S. Treasury securities	99,754		12		(28		)	99,738
U.S. government agency securities	29,525		13		(4		)	29,534
FDIC-backed certificates of deposit	10,240		6		(10		)	10,236
Total short-term investments	139,519		31		(42		)	139,508
Restricted cash:
U.S. Treasury securities	3,407		—		—			3,407
Total cash equivalents, short-term investments and restricted cash	$	154,059	$	31	$	(42	)	$	154,048

Fair Value Measurements

The following table sets forth the fair value of our financial assets by level within the fair value hierarchy:

	Fair Value Measurements at April 30, 2014 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level I)		(Level II)		(Level III)		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds	$	5,898	$	—	$	—	$	5,898
Short-term investments:
U.S. Treasury securities	122,555		—		—		122,555
U.S. government agency securities	—		34,600		—		34,600
FDIC-backed certificates of deposit	—		12,880		—		12,880
Total short-term investments	122,555		47,480		—		170,035
Restricted cash:
U.S. Treasury securities	3,412		—		—		3,412
Total financial assets	$	131,865	$	47,480	$	—	$	179,345

	Fair Value Measurements at July 31, 2013 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level I)		(Level II)		(Level III)		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds	$	11,133	$	—	$	—	$	11,133
Short-term investments:
U.S. Treasury securities	99,738		—		—		99,738
U.S. government agency securities	—		29,534		—		29,534
FDIC-backed certificates of deposit	—		10,236		—		10,236
Total short-term investments	99,738		39,770		—		139,508
Restricted cash:
U.S. Treasury securities	3,407		—		—		3,407
Total financial assets	$	114,278	$	39,770	$	—	$	154,048

We value our Level I assets, consisting of money market funds and U.S. Treasury securities using quoted prices in active markets for identical instruments. Financial assets whose fair values we measure on a recurring basis using Level II inputs consist of U.S. government agency securities and Federal Deposit Insurance Corporation, or FDIC-backed certificates of deposit. We measure the fair values of these assets with the help of a pricing service that either provides quoted market prices in active markets for identical or similar securities or uses observable inputs for their pricing without applying significant adjustments because the inputs used in the valuation model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the financial assets.

There were no transfers between Level I, Level II and Level III fair value hierarchies during the nine months ended April 30, 2014.

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Inventory and Deferred Revenue (Schedule of Deferred Revenue) (Details) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Jul. 31, 2013
Deferred Revenue Arrangement [Line Items]
Deferred revenue	$ 111,509	$ 99,244
Deferred cost of revenue	1,125	1,072
Total deferred revenue, net	110,384	98,172
Less current portion	79,177	68,479
Total deferred income taxes and other tax liabilities	31,207	29,693
Products and Licenses [Member]
Deferred Revenue Arrangement [Line Items]
Deferred revenue	4,839	7,791
Deferred cost of revenue	370	871
Services [Member]
Deferred Revenue Arrangement [Line Items]
Deferred revenue	106,670	91,453
Deferred cost of revenue	$ 755	$ 201

XML

Inventory and Deferred Revenue (Schedule of Inventory) (Details) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Jul. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Raw materials	$ 566	$ 412
Finished goods	5,206	4,066
Total inventory	$ 5,772	$ 4,478

XML

Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Apr. 30, 2014
Guarantor Obligations [Line Items]
Open purchase orders	$ 8.1
Indemnification Agreement [Member]
Guarantor Obligations [Line Items]
Term of guarantee	5 years

XML

Acquisitions (Details) (USD $)	9 Months Ended		0 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Dec. 20, 2013 IA [Member] offer		Dec. 20, 2013 IA [Member] Developed Technology Rights [Member]	Dec. 20, 2013 IA [Member] Restricted Stock Units (RSUs) [Member] installment
Business Acquisition [Line Items]
Number of employment offers			4
Shares granted						70,000
Vesting percentage						25.00%
Remaining RSUs						52,501
Cash consideration			$ 1,000,000
Fair value of fully vested RSUs	573,000	0	573,000	[1]
Number of installments						4
Vesting term						2 years
Share price			$ 32.73
RSUs granted						17,499
Total consideration			1,573,000
Finite-lived intangibles					1,000,000
Goodwill			$ 600,000
Useful life					7 years

[1] This represents the fair value of the 17,499 RSUs that were granted to IA’s former key employees which became fully vested upon closing. We determined the fair value for purchase price consideration purposes based on our closing stock price of $32.73 on December 20, 2014, the effective closing of the transaction.

XML

Net Income (Loss) Per Share

9 Months Ended

Apr. 30, 2014

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

NET INCOME (LOSS) PER SHARE

We compute basic net income (loss) per share using the weighted average number of common shares outstanding during the period. We compute diluted net income (loss) per share using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include shares issuable upon the exercise of stock options and upon the vesting of restricted stock units, or RSUs, and each purchase under our employee stock purchase plan, or ESPP, under the treasury stock method.

In loss periods, basic net loss per share and diluted net loss per share are the same since the effect of potential common shares is anti-dilutive and therefore excluded.

The following outstanding weighted-average shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended April 30,		Nine months ended April 30,
	2014	2013	2014	2013
	(In thousands)
Stock options to purchase common stock	3,448	5,584	3,693	6,198
Restricted stock units	1,789	441	1,707	182
Employee Stock Purchase Plan	15	95	115	40

XML

Stockholders’ Equity and Employee Benefit Plans (Stock-based Compensation) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 10,674	$ 5,650	$ 30,139	$ 16,190
Total unrecognized stock-based compensation balance	82,593		82,593
Total unrecognized stock-based compensation balance, Weighted-average amortization			2 years 8 months 19 days
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	6,740	1,815	17,617	3,690
Total unrecognized stock-based compensation balance	63,914		63,914
Total unrecognized stock-based compensation balance, Weighted-average amortization			2 years 11 months 8 days
Stock Option [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	2,996	2,586	9,441	7,445
Total unrecognized stock-based compensation balance	17,163		17,163
Total unrecognized stock-based compensation balance, Weighted-average amortization			2 years 0 months 25 days
Employee Stock Purchase Plan [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	938	1,249	3,081	5,055
Total unrecognized stock-based compensation balance	1,516		1,516
Total unrecognized stock-based compensation balance, Weighted-average amortization			9 months 25 days
Cost of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	953	387	2,617	1,191
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	1,828	1,145	5,411	3,541
Selling and Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	5,874	2,956	16,942	8,643
General and Administrative Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 2,019	$ 1,162	$ 5,169	$ 2,815

XML

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Jul. 31, 2013
CURRENT ASSETS:
Cash and cash equivalents	$ 91,668	$ 69,828
Short-term investments	170,035	139,508
Accounts receivable, net	32,983	38,728
Inventory	5,772	4,478
Deferred tax assets	806	1,354
Prepaid expenses and other current assets	4,746	6,023
Total current assets	306,010	259,919
Property and equipment, net	18,540	18,370
Restricted cash	3,513	3,508
Intangible assets, net	4,713	5,494
Goodwill	33,293	32,726
Other assets	710	443
TOTAL ASSETS	366,779	320,460
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	13,959	12,387
Accrued compensation	13,099	12,472
Deferred revenue, net	79,177	68,479
Total current liabilities	106,235	93,338
Deferred revenue, net	31,207	29,693
Deferred tax liability	668	1,055
Other liabilities	6,238	6,821
TOTAL LIABILITIES	144,348	130,907
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $0.0001 par value per share—5,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $0.0001 par value per share—100,000 shares authorized; 54,327 shares and 51,670 shares issued and outstanding as of April 30, 2014 and July 31, 2013	5	5
Additional paid-in capital	349,293	302,101
Accumulated other comprehensive income (loss)	60	(11)
Accumulated deficit	(126,927)	(112,542)
TOTAL STOCKHOLDERS’ EQUITY	222,431	189,553
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 366,779	$ 320,460

XML

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (14,385)	$ (5,893)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	30,139	16,190
Depreciation and amortization	6,556	4,637
Excess tax benefits from employee stock plans	(133)	(641)
Amortization of investment premium	419	265
Other	36	103
Changes in operating assets and liabilities:
Accounts receivable, net	5,745	(6,565)
Inventory	(1,294)	(1,635)
Prepaid expenses, other current assets and other assets	1,215	(1,002)
Accounts payable and accrued liabilities	1,471	1,521
Accrued compensation	627	2,306
Deferred revenue, net	12,198	15,403
Other liabilities	(583)	6,145
Net cash provided by operating activities	42,011	30,834
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments	(92,947)	(113,325)
Proceeds from maturities of short-term investments	62,070	17,648
Purchases of property and equipment	(4,699)	(13,944)
Business acquisition	(1,000)	0
Change in restricted cash	0	529
Net cash used in investing activities	(36,576)	(109,092)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under the employee stock plans	16,272	17,500
Excess tax benefits from employee stock plans	133	641
Payment of remaining unpaid initial public offering costs	0	(235)
Net cash provided by financing activities	16,405	17,906
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	21,840	(60,352)
CASH AND CASH EQUIVALENTS—Beginning of period	69,828	156,613
CASH AND CASH EQUIVALENTS—End of period	91,668	96,261
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Restricted stock units issued in connection with business acquisition	573	0
Cash paid for income taxes, net	353	809
Purchases of property and equipment not yet paid	320	1,794
Change in liability due to vesting of early exercised stock options	$ 48	$ 204

XML

Stockholders’ Equity and Employee Benefit Plans (Restricted Stock Units Activities) (Details) (Restricted Stock Units (RSUs) [Member], USD $)	9 Months Ended
	Apr. 30, 2014
Restricted Stock Units (RSUs) [Member]
Number of Units [Roll Forward]
Number of Units, Oustanding	1,986,000
Number of Units, Granted	1,767,000
Number of Units, Vested	(550,000)
Number of Units, Cancellations due to forfeitures	(166,000)
Number of Units, Oustanding	3,037,000
Weighted Average Grant Date Fair Value [Roll Forward]
Weighted Average Grant Date Fair Value, Outstanding	$ 21.15
Weighted Average Grant Date Fair Value, Granted	$ 35.84
Weighted Average Grant Date Fair Value, Vested	$ 21.02
Weighted Average Grant Date Fair Value, Cancellations due to forfeitures	$ 28.57
Weighted Average Grant Date Fair Value, Outstanding	$ 29.29

XML

Stockholders’ Equity and Employee Benefit Plans (Tables)

9 Months Ended

Apr. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-based Compensation by Statement of Operations

The following table summarizes stock-based compensation expense for stock option grants, ESPP purchase rights and restricted stock units recorded in our condensed consolidated statements of operations:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Cost of revenue	$	953	$	387	$	2,617	$	1,191
Research and development	1,828		1,145		5,411		3,541
Sales and marketing	5,874		2,956		16,942		8,643
General and administrative	2,019		1,162		5,169		2,815
	$	10,674	$	5,650	$	30,139	$	16,190

The following table summarizes stock-based compensation expense by award type:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
RSUs	$	6,740	$	1,815	$	17,617	$	3,690
Stock options	2,996		2,586		9,441		7,445
ESPP	938		1,249		3,081		5,055
	$	10,674	$	5,650	$	30,139	$	16,190

Schedule of Unrecognized Stock-Based Compensation Balance

The following table summarizes the unrecognized stock-based compensation balance, net of estimated forfeitures, by type of awards as of April 30, 2014:

	As of April 30, 2014		Weighted-Average Amortization Period
	(In thousands)		(In years)
RSUs	$	63,914	2.94
Stock options	17,163		2.07
ESPP	1,516		0.82
Total unrecognized stock-based compensation balance	$	82,593	2.72

Schedule of Determination of Fair Value

The fair value of stock option grants and ESPP purchase rights was estimated at the date of grant and start of the offering period using the following assumptions:

	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
Stock Options:
Expected term (in years)	6.08			6.08			6.08			6.08
Risk-free interest rate	1.89		%	1.06		%	1.85		%	0.97		%
Expected volatility	56		%	53		%	54		%	53		%
Dividend rate	—		%	—		%	—		%	—		%
Weighted average fair value per share	$	11.69		$	10.69		$	18.64		$	9.78
Employee Stock Purchase Plan:
Expected term (in years)	—			—			0.50-2.00			0.50 - 2.00
Risk-free interest rate	—			—			0.09% - 0.38%			0.12% - 0.26%
Expected volatility	—			—			55% - 67%			53% - 58%
Dividend rate	—			—			—		%	—		%
Weighted average fair value per share	$	—		$	—		$	12.87		$	7.07

Schedule of Stock-Based Compensation Activity

A summary of the stock option activity under our stock plans during the nine months ended April 30, 2014 is presented below:

	Number of Shares Underlying Outstanding Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In thousands)
Outstanding as of July 31, 2013	6,663		$	9.35	7.47	$	155,580
Granted	434		$	35.60
Exercised	(1,862	)	$	6.76
Canceled due to forfeitures	(159	)	$	15.86
Outstanding as of April 30, 2014	5,076		$	12.34	7.12	$	45,072
Vested and expected to vest as of April 30, 2014	4,897		$	12.04	7.07	$	44,330
Vested and exercisable as of April 30, 2014	2,780		$	8.07	6.30	$	32,304

Schedule of Restricted Stock Units Award Activity

A summary of the restricted stock unit activity during the nine months ended April 30, 2014 is presented below:

	Number of Units		Weighted-Average Grant Date Fair Value Per Share
	(In thousands)
Outstanding as of July 31, 2013	1,986		$	21.15
Granted	1,767		$	35.84
Vested	(550	)	$	21.02
Cancellations due to forfeitures	(166	)	$	28.57
Outstanding as of April 30, 2014	3,037		$	29.29

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 201	$ 242	$ 653	$ 1,068

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Description of the Business and Summary of Significant Accounting Policies (Details) (Exclusive Networks [Member])	3 Months Ended		9 Months Ended			12 Months Ended
	Apr. 30, 2014 Revenue [Member]	Apr. 30, 2013 Revenue [Member]	Apr. 30, 2014 Revenue [Member]	Apr. 30, 2013 Revenue [Member]	Apr. 30, 2014 Accounts Receivable [Member]	Jul. 31, 2013 Accounts Receivable [Member]
Organization [Line Items]
Concentration risk percentage	13.10%	11.50%	10.70%	11.90%	13.60%	11.20%

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Description of the Business and Summary of Significant Accounting Policies

9 Months Ended

Apr. 30, 2014

Accounting Policies [Abstract]

Description of the Business and Summary of Significant Accounting Policies

DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Infoblox Inc. (together with our subsidiaries, “we,” “us” or “our”) was originally incorporated in the State of Illinois in February 1999 and was reincorporated in the State of Delaware in May 2003. We are headquartered in Santa Clara, California and have subsidiaries and representative offices located throughout the world. We provide a broad family of enterprise and service provider-class solutions to automate management of the critical network infrastructure services needed for secure, scalable and fault-tolerant connections between applications, devices and users.

Basis of Presentation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated. The accompanying condensed consolidated balance sheet as of April 30, 2014, the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive loss for the three and nine months ended April 30, 2014 and 2013 and the condensed consolidated statements of cash flows for the nine months ended April 30, 2014 and 2013 are unaudited. The condensed consolidated balance sheet as of July 31, 2013 was derived from the audited consolidated balance sheet as of July 31, 2013. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, pursuant to the rules and regulations of the Securities Exchange Commission, or SEC. They do not include all of the financial information and footnotes required by GAAP for complete financial statements. We believe the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of our balance sheet as of April 30, 2014, our results of operations and comprehensive loss for the three and nine months ended April 30, 2014 and 2013 and cash flows for the nine months ended April 30, 2014 and 2013. All adjustments are of a normal recurring nature. The results for the three and nine months ended April 30, 2014 are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending July 31, 2014.

Significant Accounting Policies

We describe our significant accounting policies in Note 1 to the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013. There have been no significant changes in our accounting policies during the three and nine months ended April 30, 2014, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended July 31, 2013.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Those management estimates and assumptions affect revenue recognition, allowances for doubtful accounts and sales returns, valuation of our cash equivalents and available-for-sale investments, valuation of inventory, determination of fair value of stock-based awards, valuation of goodwill and intangible assets acquired, impairment of goodwill and other intangible assets, amortization of intangible assets, contingencies and litigation and accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the condensed consolidated financial statements.

Concentrations of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, short-term investments, restricted cash and accounts receivable. Our cash, cash equivalents, short-term investments and restricted cash are invested in high-credit quality financial instruments with banks and financial institutions. Such deposits may be in excess of insured limits provided on such deposits.

We mitigate credit risk in respect to accounts receivable by performing ongoing credit evaluations of our customers and maintaining a reserve for potential credit losses. In addition, we generally require our customers to prepay for maintenance and support services to mitigate the risk of uncollectible accounts receivable.

Significant customers are those which represent more than 10% of our total net revenue or gross accounts receivable balance at each respective balance sheet date. For the three and nine months ended April 30, 2014, Exclusive Networks Ltd., a distributor, accounted for 13.1% and 10.7% of our total net revenue. For the three and nine months ended April 30, 2013, Exclusive Networks Ltd. accounted for 11.5% and 11.9% of our total net revenue. Exclusive Networks Ltd. accounted for 13.6% and 11.2% of our total gross accounts receivable as of April 30, 2014 and July 31, 2013. We believe it is unlikely that the loss of any of our channel partners would have a long term material adverse effect on our total net revenue as we believe end-users would likely purchase our products from a different channel partner. However, a loss of any one of these channel partners could have a material adverse impact during the transition period.

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. We adopted ASU 2013-11 during the three months ended October 31, 2013 and the adoption did not have any impact on our financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2018 using one of two retrospective application methods. The Company has not determined the potential effects on the consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Apr. 30, 2014	Jul. 31, 2013
Statement of Financial Position [Abstract]
Convertible preferred stock, par value (USD per share)	$ 0.0001	$ 0.0001
Convertible preferred stock, shares authorized	5,000,000	5,000,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0
Common stock, par value (USD per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	54,327,000	51,670,000
Common stock, shares outstanding	54,327,000	51,670,000

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Description of the Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Apr. 30, 2014

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated. The accompanying condensed consolidated balance sheet as of April 30, 2014, the condensed consolidated statements of operations and the condensed consolidated statements of comprehensive loss for the three and nine months ended April 30, 2014 and 2013 and the condensed consolidated statements of cash flows for the nine months ended April 30, 2014 and 2013 are unaudited. The condensed consolidated balance sheet as of July 31, 2013 was derived from the audited consolidated balance sheet as of July 31, 2013. These unaudited condensed consolidated financial statements and accompanying notes should be read together with the audited consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended July 31, 2013.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, pursuant to the rules and regulations of the Securities Exchange Commission, or SEC. They do not include all of the financial information and footnotes required by GAAP for complete financial statements. We believe the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of our balance sheet as of April 30, 2014, our results of operations and comprehensive loss for the three and nine months ended April 30, 2014 and 2013 and cash flows for the nine months ended April 30, 2014 and 2013. All adjustments are of a normal recurring nature. The results for the three and nine months ended April 30, 2014 are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending July 31, 2014.

Use of Estimates

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Those management estimates and assumptions affect revenue recognition, allowances for doubtful accounts and sales returns, valuation of our cash equivalents and available-for-sale investments, valuation of inventory, determination of fair value of stock-based awards, valuation of goodwill and intangible assets acquired, impairment of goodwill and other intangible assets, amortization of intangible assets, contingencies and litigation and accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors and adjust those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the condensed consolidated financial statements.

Concentrations of Risk

Concentrations of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, short-term investments, restricted cash and accounts receivable. Our cash, cash equivalents, short-term investments and restricted cash are invested in high-credit quality financial instruments with banks and financial institutions. Such deposits may be in excess of insured limits provided on such deposits.

We mitigate credit risk in respect to accounts receivable by performing ongoing credit evaluations of our customers and maintaining a reserve for potential credit losses. In addition, we generally require our customers to prepay for maintenance and support services to mitigate the risk of uncollectible accounts receivable.

Significant customers are those which represent more than 10% of our total net revenue or gross accounts receivable balance at each respective balance sheet date. For the three and nine months ended April 30, 2014, Exclusive Networks Ltd., a distributor, accounted for 13.1% and 10.7% of our total net revenue. For the three and nine months ended April 30, 2013, Exclusive Networks Ltd. accounted for 11.5% and 11.9% of our total net revenue. Exclusive Networks Ltd. accounted for 13.6% and 11.2% of our total gross accounts receivable as of April 30, 2014 and July 31, 2013. We believe it is unlikely that the loss of any of our channel partners would have a long term material adverse effect on our total net revenue as we believe end-users would likely purchase our products from a different channel partner. However, a loss of any one of these channel partners could have a material adverse impact during the transition period.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. This new standard requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. We adopted ASU 2013-11 during the three months ended October 31, 2013 and the adoption did not have any impact on our financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2018 using one of two retrospective application methods. The Company has not determined the potential effects on the consolidated financial statements.

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Document and Entity Information	9 Months Ended
	Apr. 30, 2014	May 31, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	INFOBLOX INC
Entity Central Index Key	0001223862
Current Fiscal Year End Date	--07-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Apr. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		54,499,497

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Net Income (Loss) Per Share (Tables)

9 Months Ended

Apr. 30, 2014

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following outstanding weighted-average shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended April 30,		Nine months ended April 30,
	2014	2013	2014	2013
	(In thousands)
Stock options to purchase common stock	3,448	5,584	3,693	6,198
Restricted stock units	1,789	441	1,707	182
Employee Stock Purchase Plan	15	95	115	40

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Net revenue:
Products and licenses	$ 30,799	$ 33,596	$ 98,326	$ 91,501
Services	30,223	24,439	87,099	70,478
Total net revenue	61,022	58,035	185,425	161,979
Cost of revenue:
Products and licenses	7,119	7,786	22,092	20,726
Services	6,665	4,910	19,119	13,701
Total cost of revenue	13,784	12,696	41,211	34,427
Gross profit	47,238	45,339	144,214	127,552
Operating expenses:
Research and development	12,175	10,976	35,619	31,783
Sales and marketing	34,589	28,138	100,574	82,877
General and administrative	7,839	6,195	21,673	17,346
Total operating expenses	54,603	45,309	157,866	132,006
Income (loss) from operations	(7,365)	30	(13,652)	(4,454)
Other income (expense), net	124	(45)	(80)	(371)
Loss before provision for income taxes	(7,241)	(15)	(13,732)	(4,825)
Provision for income taxes	201	242	653	1,068
Net loss	$ (7,442)	$ (257)	$ (14,385)	$ (5,893)
Net loss per share - basic and diluted (USD per share)	$ (0.14)	$ (0.01)	$ (0.27)	$ (0.12)
Weighted-average shares used in computing net loss per share - basic and diluted (shares)	54,055	49,261	53,485	47,696

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Acquisitions

9 Months Ended

Apr. 30, 2014

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

On December 20, 2013, we closed the acquisition of substantially all of the assets of Internet Associates LLC, or IA, a small privately held software company that specialized in the automation of IP address management and IPv6. We did not acquire any tangible assets nor did we assume any material liabilities as part of this acquisition. We expect this acquisition will help us build on our core business.

We accounted for the IA acquisition using the acquisition method of accounting for business combinations. In addition to cash consideration of $1.0 million, we made employment offers to IA’s four former key employees in which they were granted an aggregate of 70,000 of our RSUs. Twenty-five percent of these RSUs, or 17,499, became fully vested upon closing of the transaction, and the remaining 52,501 RSUs will vest thereafter in four equal installments every six months over two years subject to their continued service to us. Aside from the RSU vesting conditions, there were no other incentives or contingent arrangements in connection with this acquisition. We accounted for the 17,499 RSUs as part of the purchase consideration as the vesting of such RSUs did not require any post-combination services. We have accounted for the other 52,501 RSUs as stock-based compensation since the vesting of such RSUs requires post-combination services. Based on the foregoing, the total purchase price of this acquisition consists of the following:

	Amount in Thousands
Cash consideration	$	1,000
Fair value of fully vested RSUs (1)	573
Total consideration	$	1,573

(1) This represents the fair value of the 17,499 RSUs that were granted to IA’s former key employees which became fully vested upon closing. We determined the fair value for purchase price consideration purposes based on our closing stock price of $32.73 on December 20, 2014, the effective closing of the transaction.

Of the total purchase price of $1.6 million, $1.0 million was allocated to the core/developed technology and $0.6 million was allocated to goodwill. The goodwill recognized in this transaction is deductible for tax purposes and is derived from expected benefits from cost synergies and former IA personnel who joined us after the acquisition.

We are amortizing the developed technology on a straight-line basis over an estimated useful life of 7 years. Amortization expense for this intangible asset was insignificant for the three and nine months ended April 30, 2014.

The acquisition-related transaction costs which were included in general and administrative expenses during the nine months ended April 30, 2014 in the condensed consolidated statement of operations were insignificant.

The historical financial results of IA were insignificant in relation to our condensed consolidated results of operations. As such, we have not provided additional historical pro forma acquisition information.

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Commitments and Contingencies

9 Months Ended

Apr. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Purchase Obligations

We outsource the production of our hardware products to third-party contract manufacturers and enter into various inventory-related purchase commitments with these contract manufacturers and other suppliers.  Our arrangements with contract manufacturers allow them to procure component inventory on our behalf based on a rolling production forecast we provide to them.  In addition to any finished goods manufactured for us, we are obligated to purchase component inventory that the contract manufacturers procure in accordance with our forecast, unless a notice of order cancellation is given in advance of applicable lead times. As of April 30, 2014, we had $8.1 million in purchase commitments under these arrangements. 

Guarantees

We have entered into agreements with some of our customers that contain indemnification provisions relating to potential situations where claims could be alleged that our products infringe the intellectual property rights of a third party. We have, at our option and expense, the ability to repair any infringement, replace the product with a non-infringing functionally equivalent product, or refund our customers the unamortized value of the product based on its estimated useful life, typically five years. Other guarantees or indemnification arrangements include guarantees of product and service performance and standby letters of credit for lease facilities and corporate credit cards. We have not recorded a liability related to these indemnification and guarantee provisions, and our guarantees and indemnification arrangements have not had any significant impact on our condensed consolidated financial statements to date.

Loss Contingencies and Legal Proceedings

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the range of loss can be reasonably estimated. However, the actual loss in any such contingency may be materially different from our estimates, which could result in the need to record additional expenses. If the amount of liability is not probable or the amount cannot be reasonably estimated, no accruals have been made. We regularly evaluate current information available to management to determine whether such accruals should be adjusted and whether new accruals are required in the periods presented.

From time to time, we are subject to various legal proceedings, claims and litigation arising in the ordinary course of business. We do not believe we are party to any currently pending legal proceedings the outcome of which would have a material adverse effect on our financial position, results of operations or cash flows. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our financial position, results of operations or cash flows.

On April 16, 2013, Versata Software, Inc., or Versata, filed suit against us in the United States District Court for the District of Delaware in an action captioned Versata Software, Inc. F/K/A Trilogy Software, Inc.; and Versata Development Group, Inc. F/K/A Trilogy Development Group, Inc. v. Infoblox, Inc., Case No 1:13-cv-00678-UNA (D.Del.) (the “Action”).  In the Action, Versata alleges that we directly and/or indirectly infringed U.S. Patent Nos. 6,834,282; 6,907,414; 7,363,593 and 7,426,481 by making, using, licensing, selling and offering for sale software products and related services including but not limited to Infoblox IP Address Management. We continue to believe we have meritorious defenses to the claims asserted in these actions and intend to defend vigorously against them. We believe at this time that liabilities associated with these cases, while possible, are not probable, and therefore we have not recorded any accrual for them as of April 30, 2014. Further, any possible range of loss cannot be reasonably estimated at this time.

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Segment Information (Tables)

9 Months Ended

Apr. 30, 2014

Segment Reporting [Abstract]

Revenue from External Customers by Geographic Areas

We operate in one single segment. The following table represents net revenue based on the customer’s location, as determined by the customer’s shipping address:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Americas	$	38,064	$	38,456	$	121,710	$	105,499
Europe, Middle East and Africa ("EMEA")	15,118		13,129		42,918		39,663
Asia Pacific ("APAC")	7,840		6,450		20,797		16,817
Total net revenue	$	61,022	$	58,035	$	185,425	$	161,979

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas

Our property and equipment, net by location is summarized as follows:

	April 30, 2014		July 31, 2013
	(In thousands)
Americas	$	18,030	$	17,997
APAC	244		224
EMEA	266		149
Total property and equipment, net	$	18,540	$	18,370

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Cash Equivalents, Short-Term Investments, Restricted Cash and Fair Value Measurements (Tables)

9 Months Ended

Apr. 30, 2014

Financial Instruments, Owned, at Fair Value [Abstract]

Schedule Cash Equivalents, Short-term Investments and Restricted Cash

The following table summarizes our cash equivalents, short-term investments and restricted cash as of July 31, 2013:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(In thousands)
Cash equivalents:
Money market funds	$	11,133	$	—	$	—		$	11,133
Short-term investments:
U.S. Treasury securities	99,754		12		(28		)	99,738
U.S. government agency securities	29,525		13		(4		)	29,534
FDIC-backed certificates of deposit	10,240		6		(10		)	10,236
Total short-term investments	139,519		31		(42		)	139,508
Restricted cash:
U.S. Treasury securities	3,407		—		—			3,407
Total cash equivalents, short-term investments and restricted cash	$	154,059	$	31	$	(42	)	$	154,048

The following table summarizes our cash equivalents, short-term investments and restricted cash as of April 30, 2014:

	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(In thousands)
Cash equivalents:
Money market funds	$	5,898	$	—	$	—		$	5,898
Short-term investments:
U.S. Treasury securities	122,499		74		(18		)	122,555
U.S. government agency securities	34,599		13		(12		)	34,600
FDIC-backed certificates of deposit	12,880		6		(6		)	12,880
Total short-term investments	169,978		93		(36		)	170,035
Restricted cash:
U.S. Treasury securities	3,409		3		—			3,412
Total cash equivalents, short-term investments and restricted cash	$	179,285	$	96	$	(36	)	$	179,345

Investments Classified by Contractual Maturity Date

The following table presents the contractual maturities of our short-term investments which are classified as available-for-sale securities as of April 30, 2014:

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due within one year	$	91,285	$	91,329
Due after one year through two years	78,693		78,706
Total	$	169,978	$	170,035

Schedule of Fair Value of Assets and Liabilities by Level

The following table sets forth the fair value of our financial assets by level within the fair value hierarchy:

	Fair Value Measurements at April 30, 2014 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level I)		(Level II)		(Level III)		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds	$	5,898	$	—	$	—	$	5,898
Short-term investments:
U.S. Treasury securities	122,555		—		—		122,555
U.S. government agency securities	—		34,600		—		34,600
FDIC-backed certificates of deposit	—		12,880		—		12,880
Total short-term investments	122,555		47,480		—		170,035
Restricted cash:
U.S. Treasury securities	3,412		—		—		3,412
Total financial assets	$	131,865	$	47,480	$	—	$	179,345

	Fair Value Measurements at July 31, 2013 Using:
	Quoted Prices in Active Markets For Identical Assets		Significant Other Observable Remaining Inputs		Significant Other Unobservable Remaining Inputs
	(Level I)		(Level II)		(Level III)		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds	$	11,133	$	—	$	—	$	11,133
Short-term investments:
U.S. Treasury securities	99,738		—		—		99,738
U.S. government agency securities	—		29,534		—		29,534
FDIC-backed certificates of deposit	—		10,236		—		10,236
Total short-term investments	99,738		39,770		—		139,508
Restricted cash:
U.S. Treasury securities	3,407		—		—		3,407
Total financial assets	$	114,278	$	39,770	$	—	$	154,048

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Segment Information

9 Months Ended

Apr. 30, 2014

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

We operate in one single segment. The following table represents net revenue based on the customer’s location, as determined by the customer’s shipping address:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Americas	$	38,064	$	38,456	$	121,710	$	105,499
Europe, Middle East and Africa ("EMEA")	15,118		13,129		42,918		39,663
Asia Pacific ("APAC")	7,840		6,450		20,797		16,817
Total net revenue	$	61,022	$	58,035	$	185,425	$	161,979

Included within the Americas total in the above table is revenue from sales in the United States of $35.9 million and $36.2 million for the three months ended April 30, 2014 and 2013 and $114.4 million and $99.5 million for the nine months ended April 30, 2014 and 2013. Aside from the United States, no other country comprised more than 10% of our net revenue for the three and nine months ended April 30, 2014 and 2013.

Our property and equipment, net by location is summarized as follows:

	April 30, 2014		July 31, 2013
	(In thousands)
Americas	$	18,030	$	17,997
APAC	244		224
EMEA	266		149
Total property and equipment, net	$	18,540	$	18,370

Included within the Americas total in the above table is property and equipment, net in the United States of $18.0 million and $18.0 million as of April 30, 2014 and July 31, 2013.

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Stockholders’ Equity and Employee Benefit Plans

9 Months Ended

Apr. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stockholders' Equity and Employee Benefit Plans

STOCKHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS

Stock-based Compensation

The following table summarizes stock-based compensation expense for stock option grants, ESPP purchase rights and restricted stock units recorded in our condensed consolidated statements of operations:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
Cost of revenue	$	953	$	387	$	2,617	$	1,191
Research and development	1,828		1,145		5,411		3,541
Sales and marketing	5,874		2,956		16,942		8,643
General and administrative	2,019		1,162		5,169		2,815
	$	10,674	$	5,650	$	30,139	$	16,190

The following table summarizes stock-based compensation expense by award type:

	Three Months Ended April 30,				Nine months ended April 30,
	2014		2013		2014		2013
	(In thousands)
RSUs	$	6,740	$	1,815	$	17,617	$	3,690
Stock options	2,996		2,586		9,441		7,445
ESPP	938		1,249		3,081		5,055
	$	10,674	$	5,650	$	30,139	$	16,190

The following table summarizes the unrecognized stock-based compensation balance, net of estimated forfeitures, by type of awards as of April 30, 2014:

	As of April 30, 2014		Weighted-Average Amortization Period
	(In thousands)		(In years)
RSUs	$	63,914	2.94
Stock options	17,163		2.07
ESPP	1,516		0.82
Total unrecognized stock-based compensation balance	$	82,593	2.72

Determination of Fair Value

The fair value of stock option grants and ESPP purchase rights was estimated at the date of grant and start of the offering period using the following assumptions:

	Three Months Ended April 30,						Nine months ended April 30,
	2014			2013			2014			2013
Stock Options:
Expected term (in years)	6.08			6.08			6.08			6.08
Risk-free interest rate	1.89		%	1.06		%	1.85		%	0.97		%
Expected volatility	56		%	53		%	54		%	53		%
Dividend rate	—		%	—		%	—		%	—		%
Weighted average fair value per share	$	11.69		$	10.69		$	18.64		$	9.78
Employee Stock Purchase Plan:
Expected term (in years)	—			—			0.50-2.00			0.50 - 2.00
Risk-free interest rate	—			—			0.09% - 0.38%			0.12% - 0.26%
Expected volatility	—			—			55% - 67%			53% - 58%
Dividend rate	—			—			—		%	—		%
Weighted average fair value per share	$	—		$	—		$	12.87		$	7.07

Under our ESPP, employees purchased approximately 0.2 million shares at an average price per share of $15.26 and 0.3 million shares at an average price per share of $13.60 during the nine months ended April 30, 2014 and 2013.

Stock Option Activity

A summary of the stock option activity under our stock plans during the nine months ended April 30, 2014 is presented below:

	Number of Shares Underlying Outstanding Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands)				(In years)	(In thousands)
Outstanding as of July 31, 2013	6,663		$	9.35	7.47	$	155,580
Granted	434		$	35.60
Exercised	(1,862	)	$	6.76
Canceled due to forfeitures	(159	)	$	15.86
Outstanding as of April 30, 2014	5,076		$	12.34	7.12	$	45,072
Vested and expected to vest as of April 30, 2014	4,897		$	12.04	7.07	$	44,330
Vested and exercisable as of April 30, 2014	2,780		$	8.07	6.30	$	32,304

Restricted Stock Unit Activity

A summary of the restricted stock unit activity during the nine months ended April 30, 2014 is presented below:

	Number of Units		Weighted-Average Grant Date Fair Value Per Share
	(In thousands)
Outstanding as of July 31, 2013	1,986		$	21.15
Granted	1,767		$	35.84
Vested	(550	)	$	21.02
Cancellations due to forfeitures	(166	)	$	28.57
Outstanding as of April 30, 2014	3,037		$	29.29

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Income Taxes

9 Months Ended

Apr. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The provision for income taxes for each of the three months ended April 30, 2014 and 2013 was $0.2 million, and consisted primarily of state and foreign income taxes.

    The provision for income taxes for the nine months ended April 30, 2014 and 2013 was $0.7 million and $1.1 million, which consisted of state and foreign income taxes. The decrease in the provision for income taxes for the nine months ended April 30, 2014 compared to the same period in the prior year was principally attributable to lower state income tax as a result of lower fiscal 2014 projected taxable income.

For the three and nine months ended April 30, 2014 and 2013, our provisions for income taxes differed from the statutory amount primarily due to U.S. and foreign taxes currently payable, as we realized no benefit for current year losses due to maintaining a full valuation allowance against the U.S. net deferred tax assets.

The realization of tax benefits of deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence, management does not believe it is more likely than not that the domestic net deferred tax assets will be realizable. Accordingly, we have provided a full valuation allowance against our domestic net deferred tax assets as of April 30, 2014 and July 31, 2013. We intend to maintain the valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance. During the three and nine months ended April 30, 2014, there have been no material changes to the total amount of unrecognized tax benefits.

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Subsequent Event (Notes)

9 Months Ended

Apr. 30, 2014

Subsequent Events [Abstract]

Subsequent Event

SUBSEQUENT EVENT

On May 30, 2014, an alleged class action entitled Paul Ansfield v. Infoblox Inc., et al., No. 5:14-cv-2500-VC, was filed in the United States District Court for the Northern District of California, against us and two of our officers. The suit asserts purported claims under Sections 10(b) and 20(a) of the Exchange Act for allegedly misleading statements regarding our business and financial results. The suit is purportedly brought on behalf of purchasers of our securities between September 6, 2013 and February 10, 2014, and seeks compensatory damages, fees and costs. A similar complaint, purportedly brought on behalf of purchasers of our securities between September 5, 2013 and May 29, 2014, was filed in the same court on June 4, 2014, in an action entitled Safedin Beqaj v. Infoblox Inc., et al., No. 4:14-cv-2564-PJH. The defendants have not yet responded to these complaints. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flows.

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Stockholders’ Equity and Employee Benefit Plans (Stock Option Activities) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Apr. 30, 2014	Jul. 31, 2013
Number of Shares Underlying Outstanding Options [Roll Forward]
Number of Shares Underlying Outstanding Options, Beginning Balance	6,663,000
Number of Shares Underlying Outstanding Options, Granted	434,000
Number of Shares Underlying Outstanding Options, Exercised	(1,862,000)
Number of Shares Underlying Outstanding Options, Canceled due to Forfeitures	(159,000)
Number of Shares Underlying Outstanding Options, Ending Balance	5,076,000	6,663,000
Number of Shares Underlying Outstanding Options, Vested and Expected to Vest	4,897,000
Number of Shares Underlying Outstanding Options, Exercisable	2,780,000
Weighted Average Exercise Price [Roll Forward]
Weighted Average Exercise Price, Beginning Balance	$ 9.35
Weighted Average Exercise Price, Granted	$ 35.60
Weighted Average Exercise Price, Exercised	$ 6.76
Weighted Average Exercise Price, Canceled due to Forfeitures	$ 15.86
Weighted Average Exercise Price, Ending Balance	$ 12.34	$ 9.35
Weighted-Average Exercise Price, Vested and Expected to Vest	$ 12.04
Weighted-Average Exercise Price, Exercisable	$ 8.07
Weighted Average Remaining Contractual Term [Abstract]
Weighted Average Remaining Contractual Term	7 years 1 month 13 days	7 years 5 months 19 days
Weighted-Average Remaining Contractual Term, Vested and Expected to Vest	7 years 0 months 25 days
Weighted-Average Remaining Contractual Term, Exercisable	6 years 3 months 18 days
Aggregate Intrinsic Value [Abstract]
Aggregate Intrinsic Value, Outstanding	$ 45,072	$ 155,580
Aggregate Intrinsic Value, Vested and Expected to Vest	44,330
Aggregate Intrinsic Value, Exercisable	$ 32,304

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Acquisitions (Tables)

9 Months Ended

Apr. 30, 2014

Business Combinations [Abstract]

Schedule of Business Acquisitions

Based on the foregoing, the total purchase price of this acquisition consists of the following:

	Amount in Thousands
Cash consideration	$	1,000
Fair value of fully vested RSUs (1)	573
Total consideration	$	1,573

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Cash Equivalents, Short-Term Investments, Restricted Cash and Fair Value Measurements (Available-for-sale Securities) (Details) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Jul. 31, 2013
Short-term investments [Abstract]
Short-term investments, Amortized Cost	$ 169,978	$ 139,519
Short-term investments, Gross Unrealized Gain	93	31
Short-term investments, Gross Unrealized Losses	(36)	(42)
Short-term investments	170,035	139,508
Restricted Cash [Abstract]
Total cash equivalents and short-term investments, Amortized Cost	179,285	154,059
Total cash equivalents and short-term investments, Unrealized Gains	96	31
Total cash equivalents and short-term investments, Unrealized Losses	(36)	(42)
Total cash equivalents and short-term investments, Estimated Fair Value	179,345	154,048
Amortized Cost
Amortized cost, Due within one year	91,285
Amortized cost, Due between one to two years	78,693
Amortized cost, Total	169,978
Estimated Fair Value
Estimated Fair Value, Due within one year	91,329
Estimated Fair Value, Due between one to two years	78,706
Estimated Fair Value, Total	170,035
US Treasury Securities [Member]
Short-term investments [Abstract]
Short-term investments, Amortized Cost	122,499	99,754
Short-term investments, Gross Unrealized Gain	74	12
Short-term investments, Gross Unrealized Losses	(18)	(28)
Short-term investments	122,555	99,738
Restricted Cash [Abstract]
Restricted cash, Amortized Costs Basis	3,409	3,407
Restricted cash, Gross Unrealized Gains	3	0
Restricted cash, Gross Unrealized Losses	0	0
Restricted cash, Fair Value Disclosure	3,412	3,407
US Government Agencies Securities [Member]
Short-term investments [Abstract]
Short-term investments, Amortized Cost	34,599	29,525
Short-term investments, Gross Unrealized Gain	13	13
Short-term investments, Gross Unrealized Losses	(12)	(4)
Short-term investments	34,600	29,534
FDIC-backed certificates of deposit [Member]
Short-term investments [Abstract]
Short-term investments, Amortized Cost	12,880	10,240
Short-term investments, Gross Unrealized Gain	6	6
Short-term investments, Gross Unrealized Losses	(6)	(10)
Short-term investments	12,880	10,236
Money Market Funds [Member]
Cash equivalents [Abstract]
Cash equivalents, Amortized Cost	5,898	11,133
Cash equivalents, Unrealized Gains	0	0
Cash equivalents, Unrealized Losses	0	0
Cash equivalents, Estimated Fair Value	$ 5,898	$ 11,133

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Condensed Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Apr. 30, 2014	Apr. 30, 2013
Statement of Comprehensive Income [Abstract]
Net loss	$ (7,442)	$ (257)	$ (14,385)	$ (5,893)
Unrealized holding gain on short-term investments, net	26	30	71	26
Comprehensive loss	$ (7,416)	$ (227)	$ (14,314)	$ (5,867)

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Inventory and Deferred Revenue

9 Months Ended

Apr. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Inventory and Deferred Revenue

INVENTORY AND DEFERRED REVENUE

Inventory

Inventory consists of the following:

	April 30, 2014		July 31, 2013
	(In thousands)
Raw materials	$	566	$	412
Finished goods	5,206		4,066
Total inventory	$	5,772	$	4,478

Deferred Revenue, Net

Deferred revenue, net consists of the following:

	April 30, 2014		July 31, 2013
	(In thousands)
Deferred revenue:
Products and licenses	$	4,839	$	7,791
Services	106,670		91,453
Total deferred revenue	111,509		99,244
Deferred cost of revenue:
Products and licenses	370		871
Services	755		201
Total deferred cost of revenue	1,125		1,072
Total deferred revenue, net	110,384		98,172
Less current portion	79,177		68,479
Non-current portion	$	31,207	$	29,693

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Cash Equivalents, Short-Term Investments, Restricted Cash and Fair Value Measurements (Schedule of the Fair Value of Assets and Liabilities by Level) (Details) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2014	Jul. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	$ 170,035	$ 139,508
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	122,555	99,738
Total financial assets	131,865	114,278
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	47,480	39,770
Total financial assets	47,480	39,770
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
Total financial assets	0	0
Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	170,035	139,508
Total financial assets	179,345	154,048
US Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	122,555	99,738
Restricted cash	3,412	3,407
US Treasury Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	122,555	99,738
Restricted cash	3,412	3,407
US Treasury Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
US Treasury Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
US Treasury Securities [Member] | Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	122,555	99,738
Restricted cash	3,412	3,407
US Government Agencies Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	34,600	29,534
US Government Agencies Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
US Government Agencies Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	34,600	29,534
US Government Agencies Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
US Government Agencies Securities [Member] | Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	34,600	29,534
FDIC-backed certificates of deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	12,880	10,236
FDIC-backed certificates of deposit [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
FDIC-backed certificates of deposit [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	12,880	10,236
FDIC-backed certificates of deposit [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	0	0
FDIC-backed certificates of deposit [Member] | Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	12,880	10,236
Money Market Funds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents	5,898	11,133
Money Market Funds [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents	0	0
Money Market Funds [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents	0	0
Money Market Funds [Member] | Total [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents	$ 5,898	$ 11,133

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Inventory and Deferred Revenue (Tables)

9 Months Ended

Apr. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Inventory

Inventory consists of the following:

	April 30, 2014		July 31, 2013
	(In thousands)
Raw materials	$	566	$	412
Finished goods	5,206		4,066
Total inventory	$	5,772	$	4,478

Schedule of Deferred Revenue, Net

Deferred revenue, net consists of the following:

	April 30, 2014		July 31, 2013
	(In thousands)
Deferred revenue:
Products and licenses	$	4,839	$	7,791
Services	106,670		91,453
Total deferred revenue	111,509		99,244
Deferred cost of revenue:
Products and licenses	370		871
Services	755		201
Total deferred cost of revenue	1,125		1,072
Total deferred revenue, net	110,384		98,172
Less current portion	79,177		68,479
Non-current portion	$	31,207	$	29,693